Down the Canyon and Up the Mountain

Ten years ago this summer, I started a journey.  I made a decision to climb a mountain.  The path is well travelled and well marked, but supposedly so arduous few are allowed to start the journey.

Setting off to summit this peak, I first had to descend into the depths of a canyon.  Others had told me of this canyon.  They did not, however, explain its diabolical nature.  They did not warn me the sides of the canyon are loose scree fields, easy to get down, very difficult to get up. 

Going down wasn’t too bad, and everyone around said it would be worth it on top of the mountain.  The scree seemed to let me almost surf the way down.  However, the bottom of the canyon was dark, cold, and filled with sharp brush which abused the body. 

“You’ll get through,” they told me. “You’ll survive.”

Finally, though, after I reached the bottom, I began the journey back up.  I waded the cold creek.  I took a brief rest.  Then, I set out on a long hard climb up.  I could see neither the canyon rim, nor the original peak I had envisioned climbing.  

The loose scree gave way under me and sent backwards, 6-7% with every step.  It seems as though every possible handhold belied some danger: thorns, scorpions, snakes, and the like. 

Finally, after a long slog, I have reached to the canyon rim.  From the rim I can now look up and see the mountain that had been my goal.  I am tired, hot, sweaty, and forever changed from who I was before I descended into the dark of the canyon.  

I gaze longingly up at the mountain, it is visible, yet still so far away.  I turn around, and realize I am at the exact same elevation I started at, 10 years before, just a chasm of time away.  I am closer to the mountain, yes, but no further away from my starting point. 

This is what it feels like to reach Zero Net Worth after 10 years of medical training and working as a physician.   So much has changed, and yet, financially, I am only back where I started. 

10 Years Back to Zero

My net worth was barely above zero prior to medical school, but it was positive. That was the last time I had a positive net worth. The massive debt of medical school sent my net worth south of negative $300,000 at its lowest.

I recently calculated my net worth and, I have officially reached a positive net worth.

10 years later

Technically, somewhere in the last 6 months I reached Zero Net Worth. It took me a few months shy of a decade, but I have crawled back from the financial hole medical education put me in.

To be clear, I am not debt free. All of my assets just now officially outweigh my debt.

Getting back to zero is a necessary part of building wealth as a physician (assuming you took out loans for medical school). Nonetheless, the idea of 10 years of hard work, missed sleep, and sacrificing time with family and friends leading only getting me back to even is depressing.

Accounting for Life

Of course, money is a poor way to track life’s ups and downs. The value I place on different periods of my life over the last ten years correlates very poorly with their contributions to my net worth.

Medical School

The most striking example of this is medical school. By far the most expensive part of my life up to this point. I feel, at best, neutral about my medical school experience. It was okay, but certainly not worth the money it cost (from an experience standpoint).

I learned a lot in medical school, relatively little of it has much bearing on the actual practice of medicine or my life today. In my opinion, medical school is merely the price of admission to medicine, not much more.

By far the most significant value add to my life that came out of medical school was my wife. Meeting her is the great redeeming factor of my time in medical school, and worth it all.

Residency

My financial footing in residency probably changed little overall. I saved some money in Roth and traditional IRA, so the cost of my interest on my loans was probably offset by this.

On the other hand, residency has been and likely will always remain my favorite time in medicine. I had a great group of co-residents and humane faculty who were most interested in teaching first and foremost.

I worked like a dog, but it seemed like it had purpose and I was doing something that mattered, with people I enjoyed. Sure, was I happy to give up the 80 hour weeks when I finished. Nonetheless, I would have traded a lot of money from my first job to keep the sense of camaraderie and joy in medicine which I knew in residency.

In contrast to medical school, marrying my wife in residency seems not redeeming, but complementary. The memory of getting married in my R2 year blends with the frenetic sense of energy, growth, and progress of my residency years. Altogether, it was a good time to be young, in love, and doing something which felt like it mattered.

Attending

Obviously, working as an attending has been the most financially valuable part of my time in medicine, however it has also had the most ups and downs.  I was seriously looking for ways to quite medicine entirely 6 months into my first job. 

I was making more money than I ever dreamed possible and I was miserable. Honestly, the work of seeing patient’s wasn’t bad, but it wasn’t good enough to make up for the toxic culture, uninspired and vapid leadership, and burnt-out, greedy partners.

Having our first daughter and having to say good-bye in less than a month was a whirlwind of emotions.  I would not trade anything the experience of knowing and loving her for anything.  It was nonetheless a trying time.  

My current job is entirely satisfactory.  I have times where I get a good deal of satisfaction out of what I do, times when I am entirely fed up with it, and most of the time it just seems like a decent enough way to make a more than decent living. 

The joy of having our second daughter grows exponentially with every day.  It has been a relief to experience fatherhood with the joy and hope we are told to expect.  Life keeps moving. 

Life is Rich

I read a lot of physician blogs at times, and enjoy most of them.  Many physicians correlate their discovery of financial literacy with improvement in their overall happiness and life.  

I think this improvement actually comes more from simply moving to a more disciplined approach to life.  Finance simply provides an easily accessible framework on a topic that matters. Money matters, it can be the source of great stress and anxiety.   However, it will never bring happiness.  

Looking through the last ten years through the lens of my net worth is actually really depressing.  If life were about net worth, I probably should not have become a doctor.  The jury might still be out on that decision anyway.  Life is so much richer than numbers. 

I have developed a much richer appreciation for the human condition and experience in medicine than I ever would have in almost any other profession.

This richness cannot be quantified nor repossessed.  It does not earn me interest, yet pays me great dividends.  The discipline to examine our finances opens the window to examining ourselves and our lives, if we follow the breadcrumbs. 

Discipline is one of the great keys to a life well-lived.  Financial literacy, not as a competitive sport of amassing net worth, but as a training ground for personal discipline, is a useful tool for honing the skills which actually lead to a rich life. 

If the trail is only a means to peak-bagging, we are already lost.  To gain the most important benefits from financial literacy and independence we must remember they are not the goals, but merely training grounds for the personal skills which can help us live a life worth reveling in. 

 

P.S. I have really enjoyed looking for images of classic artwork to use as my featured images, as they are all public domain, I do not need to reference them, but I think think I am going to start adding information about each featured image at the bottom of each post with a link to information on the painting for those interested. 
Featured Image: Chasm of the Colorado by Thomas Moran 1873-1874

The Psychology of My Debt

My debt weighs on me, both financially and psychologically. Interestingly, this was not the case in medical school or residency. Then, about 3 months into my first job its specter began to grow, even though the actual number started declining for the first time in 7 years.

Overtime, the psychological importance of my debt balooned in inverse proportion to the speed at which I was paying it off. I would spend hours per month tracking it, trying to find ways to pay it off faster.

I stared at the screen, as if by sheer will I could reverse the nature of compound interest. This did not work.

This was always going to be a bad thing for me, psychologically. Money has never motivated me. Having more money has never made feel better about life or myself. It felt unnatural to be so concerned about numbers on a screen. It just wasn’t me – but I couldn’t stop.

Turns out, having lots of money won’t make you happy, but owing lots to someone else can make you miserable.

My wife tells me sometimes our marriage feels like a terrible love triangle between me, her, and my debt. Yet, after leaving my first job, the problem did not improve. It actually worsened.

We took a significant hit in income and any hope at loan repayment went away with transitioning to 1099 work. I felt the pressure of paying off the debt land squarely and intensely on my shoulders. I focused all the energy I had previously given to medical training onto paying down my debt.

It had become my white whale.

Obsession is Never Healthy

At first, I had assumed my debt weighed on me because I hated my first job. I had jumped from the cloistered, privileged, insincere nobility of academic medicine into the cauldron of RVUs and the greed driven Hospital-Pharmaceutical Complex. The disillusionment was scalding.

More disturbingly, my partners were lining up at the trough to eat the unethical slop. The system was playing them like fiddles, and they were happy to oblige. Never mind the fact they were actually miserable.

Yet, they played the part of selfless, caring physicians – even if all we ever talked about at meetings was how much money they could make. I felt tainted by association. The guilt gnawed at me.

That guilt did not immediately go away upon changing to my current locum tenens work, it morphed into a different kind of guilt. I felt guilty for abandoning the noble aim of continuity of care and my former dream of being the “local doc.”

So, my obsession grew, despite changing my work situation.

Kids Change Everything

Having our second daughter gave me a chance to refocus. Having a family has changed the relationship I have with medicine again. I have slowly been able to let go of some of the anger I had at the way my partners and health system treated me.

I had directed a good deal of that anger at the institution of medicine. I have since come to realize it isn’t particularly helpful to hold an amorphous profession accountable. I will never be able to have closure with a profession.

I have also released myself of my burden of accountability to the profession. If the profession is not accountable to me, I am not accountable to it. This has greatly improved my relationship with work.

I have managed to lower my bar for satisfaction drastically. My relationship with medicine has evolved from complete devotion, to resentful hatred, to a simple acceptance.

This evolution has allowed me to see how much power I was giving my debt over my life.

We Give Things Power over Us

Most people seem to have the problem of not realizing how detrimental debt is to their financial health. I had the opposite problem, I gave my debt complete control over my enjoyment of life.

I had made eliminating my debt into the dreaded “next step.” That next accomplishment I had to reach before I could be happy. Even though I knew that trap all too well, it had caught me again.

Debt had become a binary state. I was either in it or I wasn’t, progress did not exist. And, as long as I was in debt, I was beholden to medicine. And that pissed me off.

Eventually, I realized it had gone too far…

Around tax time, I was able to throw a huge amount of money at my debt. As this was the first year I have been paid substantially as a 1099 sole proprietor I apparently had over-saved substantially for my tax bill. In one fell swoop, I eliminated over 15% of my remaining debt burden.

But, I was not pleased. Instead of congratulating myself on making large progress in eliminating debt, I was emboldened to try and move up the timeline on making myself debt free.

I felt the need to pay more faster because I had made so much progress so quickly. I knew this was not a reasonable reaction.

I was chasing the dragon…

I had something to decide. I could continue to be angry and resentful for 2-3 more years and hope it got better when I paid off my loans (the go to doctor coping mechanism). Or, I could actually wrestle with my emotions and try to find a way to happier in the present.

Perspective Change

So, instead of continuing to think of my loans in binary terms of being chained to or free from medicine. I asked myself a bigger question.

“If I had already paid off my loans, what would I do differently?”

Turns out, probably not much.

I would probably work a little bit less. We would travel more(I hope), probably buy a house. But, most importantly, I wouldn’t quit medicine and try a different career.

This was hugely freeing.

The emotional benefit of being debt free is the idea you could walk way if you wanted to. So, realizing I would not walk away took away a lot of the power of the loans.

Doing The Math

Once I deflated the emotional power of my debt, I could look at it a bit more rationally. I had made a lot of progress. I decided to run some scenarios.

I ran various amortization schedules based on refinancing vs not and at different time intervals (2-5 more years). Instead of the shackles vs. freedom emotional response to debt, I tried to give myself more of a dollars and cents view.

Turns out, depending on various scenarios, my debt will likely cost me another $10,000-$25,000 in interest. Also, it turns out I should probably refinance my student loans.

So, those numbers are not nothing. However, it allows for a more rational conversation about my loan debt. Instead of a binary choice for happiness, I can ask:

“How many more months am I willing to be in debt to enjoy my life more for the net 2-4 years?

Since I am not going to go out and buy a Tesla or mega-house or anything like that, it is mostly about how gentle am I going to be with myself about how choosing to work a little less so I can spend more time hiking, fishing, traveling, etc.

Turns out, I am probably willing to spend up to 6 months more in debt to have more time doing other things I enjoy.

I am tired of waiting for the next thing, I am living right now. 2 years of living a happier, more balanced life seems worth a few more months of debt.

Student Loans: Modern Indentured Servitude

When it comes to my finances, everything else besides paying off my student loans seems trivial. I mean, I am attending physician. We have no shortage of money to survive on.

Nonetheless, 6 years out from my medical school graduation, almost half of my after tax income goes to servicing my student loans. Indeed, I might have quite medicine altogether after my daughter died if not for my student loans

Given that our finances provide more than enough for a comfortable life, all other financial decisions take a back seat to my student debt. Pretty much anything I forego financially is because of student loans.

My student loans are financial and emotional albatross that weigh on me constantly, even when I am not consciously thinking about them. Currently, I am an indentured servant to the medical profession. The debt changes the relationship physicians have with their chosen calling.

Debt is a trap, especially student debt, which is enormous, far larger than credit card debt. It’s a trap for the rest of your life because the laws are designed so that you can’t get out of it. If a business, say, gets in too much debt, it can declare bankruptcy, but individuals can almost never be relieved of student debt through bankruptcy.
-Noam Chomsky

The Long Road to Freedom

I prioritize paying off my debt above all other significant expenses. This has led to some significant improvement in my student loan balance. This has tracked about like this:

Graduate from medical school: ~$285,000 principal + interest.

6 months later, interest capitalized: $330,000 principal.

Finished residency: $330,000 principal+$65,000 interest=$395,000.

Currently, almost 3 years out from residency graduation: $188,000 principal+$30,000 interest= $218,000.

So, progress is being made. On the other hand, it comes at a cost. I have avoided contributing to the economy in significant ways because of my debt.

Some are basic consumer activities which I am more than happy to forestall. These include buying newer cars, new furniture, etc. These thing bring me little to no happiness, so foregoing them is not a sacrifice. The economy might miss those purchases some, but relatively little.

These, on the other hand, are significant:

  1. Saving for retirement: Back when I was employed (W-2), I took advantage of my employer’s match and maxed out my 403b. However, now with SEP-IRA which has no match, I still contribute, but at a much lower rate than maxing out (partially because the max is so high relative to my income (>50,000). The 6.5% guaranteed return on my debt is hard to dismiss.
  2. Home ownership: we tried this, got lightly burned. We will probably rent for a total of 3-4 more years before we try and buy another house. Another significant investment in the economy delayed.
  3. Pursuing activities other than working and finances. I have to focus a great deal of time and energy on paying down debt. So much so, it sometimes feels like I am in debt residency. I read about finances, scheme on ways to increase my debt payments, etc. Sometimes, it leads to neglecting other parts of my life.

Who Cares?

A reasonable response to my hand wringing over my debt is, indeed, “Who Cares?” I am in no way living in destitution. I will, in the next 2-3 years be able to pay off my debt entirely without any real deprivation (we live on about $90k/year for a family of 3 – very comfortable).

Additionally, one could point out I went to medical school knowing what it would cost and was not forced to accept loans in exchange for education. This is also true.

Moreover, what will likely end up being a total $500,000 investment will have moved me from a childhood of living on about $50-70,000/year in today’s dollars with a family of 5 to 4-5x times that income/year. I was never going to be an investment banker, tech entrepreneur, or engineer, so it is unlikely I would have made that jump in income any other way.

If you feel these things, that is totally legitimate. I do not need anyone’s pity for my financial situation, but you might want to stop reading now.

On the other hand, if this affects a privileged actor in the economy such as I, imagine how it holds the lives of less privileged students hostage.

Paying to Play in the Modern Economy

This plays out in the broader economy. We have placed increasingly expensive layers of education in between poverty and opportunity.

This is key.

The increasing cost of education and student loans, in particular, have made opportunity only available to the wealthy and those willing to live a good portion of their lives in indentured servitude.

I want to emphasize this point: for a huge number of students the price for the access to opportunity can only be paid with student loans. They do not represent an investment with a guaranteed return, but the only the opportunity to collect.

On top of this, unlike almost any other business debt, educational debt is non-cancellable. For example, I know someone who started medical school. Her mother got cancer when she was in medical school. She was able to finish, but with great difficulty and still has not been able to start residency. But her debt keeps accumulating interest….

In any other business situation, if you took out a loan to invest in a business and something terrible happened, you could declare bankruptcy and at least get back to zero. Educational debt just sits there, continuing to accrue interest despite your inability to collect on the investment….for the rest of your life.

Medical Schools Hold Abnormal Bargaining Power

Medical schools have disproportionate power when negotiating with potential clients (students). They are the gate keepers to a prestigious and historically wealthy profession.

What bargaining power do individual students have?

The average age of beginning medical students is 23 years old. Many of them have spent close to a decade striving towards medical school admission. Every physician they know has taken on loans to become a physician, so who is going to say no?

Are the risks of being unable to repay your loans explained to first year medical students before they sign on the dotted line?

I think not, because medical schools don’t care.

As long as medical students graduate, they don’t care about their debt. They just want all four years of loan payments.

It is inaccurate to say medical students really understand what they are getting into when they accept loans. For instance, I think few understand the cost of the interest compounding while they are in residency.

Moreover, no first year medical student knows how long they will be in residency. So, it is literally impossible to know what the cost will end up being when beginning medical school.

However, no student agreeing to take on loans can understand how the yoke of student loan payments will make them feel. The way it might weigh on their lives for 10-20 years. That can only be experienced and doesn’t have a cost measured in dollars.

Still, most physicians with discipline, and some luck, can pay off the loans relatively quickly.

Student Debt will have Long Term Effects

Beyond the specifics of my or any physician’s experience is the reality of student debt becoming a giant drag on the overall economy.

As a society, we are trading a large prolonged stimulus to the higher education sector in exchange for a significant drags on future productivity and consumption.

Moreover, we have provided the education sector with a way to be almost completely cost insensitive. In the days when state and federal dollars made of the bulk of their budgets, public universities had to be cost sensitive. Now, they just increase income from students, almost overwhelmingly from student debt.

We expect the most financially vulnerable of our population (young students) to enter into lifetime binding contracts with these institutions.

Meanwhile, where are they getting most of their financial advice?

From these institutions themselves, whose main goal is to keep up their class sizes. They certainly don’t have the long term financial health of their students as their primary concern.

We have yoked an entire generation with the personal responsibility for our penchant for deficit spending.

Back to My Indentured Servitude

A colleague of mine who paid off his student loans with hard work and sacrifice told me, “I am so glad I did, it has completely changed my feeling about practicing medicine.”

He gave voice to what a lot of young physicians know: their ability to get creative, tack risks in business, and try and improve the healthcare system is hamstrung by the need to get out of massive debt.

The Hospital-Pharmaceutical Complex has been very adept at exploiting this as a way to keep a churning stream of physicians willing trade their profession for escape from financial bondage.

As for myself, we are yet to see if it turns out to be worthwhile investment. I could have been earning income and saving for retirement since my mid-late 20s instead of accruing debt. It largely depends on how long I work as a physician.

Luckily, I have found a practice arrangement that I can imagine working in for quite a while. The freedom to take a couple of months off from a particular working environment has greatly extended my working life.

2 years ago I was thinking about trying to FIRE like so many physicians and possibly switch to a non-clinical job in the process. Now, as long as I get my debt paid off soon, I can imagine a reasonably lengthy time career as a physician.

However, not all physicians are so lucky, and most non-physicians don’t have anywhere near the options physicians.

Why I Haven’t Refinanced my Student Loans, Yet.

vagaries of living with student loans

Student loans suck, I hate mine, with a passion – my wife thinks I am obsessed. Though I hate how expensive debt is, mostly I hate how it steals a certain amount of liberty from your life. Refinancing helps you save money in the long run, but it can also trap you in a job or situation that is really bad for you and your family – I should know.

Fleet Street Debtors Prison

If I had refinanced prior to my daughter dying and my partners being shitheads and had a 4000-5000/month student loan payment, I would have felt MUCH more pressure to try and stick it out.  Moving would have seemed much more risky.  At least financially, that gig was damn good.  I may have ended up losing my whole career or even my marriage for the sake of saving some interest payments over the course of several years.

I want to reiterate that I hate my student loans. In fact, after leaving that job, we sold a house, moved, and started renting.  We took what we got out of the down payment from the sale and paid down loans, 12-15% of my loan burden in one fell sweep.  That is how much I hate student loans.

why i still haven’t refinanced

That all being said, I wanted to touch on a couple of aspects of the whole student loan refinancing debate that I think are under-appreciated in some of the other discussions and with which I have personal experience:

  1. Income Driven Repayment has more options than I usually see discussed
  2. Not all physicians are anesthesiologists, radiologists, and private practice emergency medicine docs making $300-500k a year.
  3. Capitalization sucks – going off of an Income Driven Repayment plan causes all that accumulated interest to capitalize.
  4. Life is really freaking unpredictable and the federal student loan servicers are much more flexible than a traditional lending organization.
medical school and residency

Almost all of us ended up on income driven repayment (IDR) during residency.  My biggest financial mistake to date was going to one of the most expensive out-of-state medical schools.  I didn’t have to, my home state has one of the cheapest, and I got in.  I just thought it would be a better career move, and plenty of people agreed with me at the time.

As a first year attending, reading the White Coat Investor was like being visited by the Dickensian Ghost of Financial Decisions Past.

Anyway, I had and have A LOT of student loans.  When I graduated medical school, I signed up for Pay As You Earn (PAYE) rather than Income Based Repayment (IBR), which allows for a lower monthly payment.  There is another REPAYE, which is even lower (point 1).  Over the course of three years of residency, I accumulated about $65,000 in interest. True, only about 33,000 of that could capitalize under PAYE terms, that is till a lot new interest earning debt.

first year attending

If had gone off of PAYE at the time I started my first job, I would have had a $4000/month payment and $33,000 of newly capitalized debt (point 3).  Instead, I stayed on PAYE, my payment was about $1500 and that interest DID NOT capitalized.

My student loan burden (capital + interest) is about $150,000 less than when I graduated.  I am earning in the $200-250k range as a family doc (point 2) and not $500k/year.  Because of that, I still qualify for PAYE, and I still have about $35,000 in interest that has not capitalized.

Obviously, I payed much more than minimum.  I am not saying that paying the minimum is a good idea.  What I am saying, is that even though I was still paying $5-10k/month in student loan payments, I had the flexibility to pay less if something unexpected happened.  That flexibility is worth something.

Now, someone who likes math more than I do could probably make a educated guess on where the benefit/cost break even point is on refinancing versus interest capitalizing.  I still have never done that. I probably should.

But, Mousie, thou art no thy lane [you aren’t alone]
In proving foresight may be vain:
The best laid schemes o’ mice an’ men
Gang aft a-gley, [often go awry]
An’ lea’e us nought but grief an’ pain,
For promised joy.

Robert Burns, To a Mouse, on Turning Her Up in Her Nest With the Plough, November, 1785

LIFE IS UNPREDICTABLE (point 4)

The flexibility of IDR was priceless when I had to walk away from my job for the health of myself and my family.  Being able to only pay $1200/month for a couple of months on my loans was a huge relief.

As it was, arranging and paying for multistate move, paying rent and a mortgage for 3 months simultaneously, getting licensed in a new state, and arranging my current traveling doctor gig was stressful enough.

If I had been juggling a $5000/month payment, I might have folded.   Inertia and fear might have kept me miserable in my old job.  It could have cost me my life.  Physician suicide is not a rare thing these days.  How do you put a dollar sign on that?