Disclaimer: I’m not a financial adviser, nor do I play one on the internet, so all contents within this post should be vetted by you to ensure accuracy. Also, remember that PA, in my case, stands for Physician Assistant, not Personal Accountant. Do your homework about your finances — it’ll change your life!
$35,000. This is all that is left of my student loan debt. For many, in these difficult times, that mountain of debt may look like Everest. I feel blessed and grateful that this amount appears to be within close reach of payoff, especially given that it was at $108,000 just 4 months ago. Yes, if you just did the math, we have put >$70,000 towards my student loan debt in 4 months, and are on the brink of being completely debt-free in 2021.
I can hear the naysayers and nonbelievers already saying that because I’m a PA and have a good salary, of course this sort of financial jiu-jitsu is possible. But what if I told you that my wife paid off >$70,000 in less than 9 months as a school teacher? If one could be a fluke, then maybe two just might be a pattern that can be replicated? Maybe we have the right recipe, but I’m here to tell you that there is no secret sauce, as a little knowledge and discipline is all that you need. It also helps to have opportunity knocking, such as that hidden within this pandemic.
Here we are in December 2020, and as of the writing of this post, we are in month #9 of the CARES act. For federal student loans, there has been a forbearance placed on payments, with zero % interest accrual, now through January 31st, 2021 (recent extension from 12/31/20). We do not yet know what will happen come February 1st, 2021, in regards to student loan payments, and cross your fingers that action will be taken to ease the student loan burden for Americans. (I will admit that I am skeptical that a sweeping executive action or plan is going to wipe the student-loan slates clean.)
So, there has essentially been 9 months wherein no payments were required on these federally-held student loans, and one bright spot for those on the Public Service Loan Forgiveness (PSLF) track, these months have counted as qualifying payments on your way to being off the hook for the remainder of your loans. I was in that program myself until around March 2020, and due to changes in my payment increases with the income-based plan, along with the circumstances with the CARES Act and disdain for FedLoan Servicing, my wife and I decided to take control and get this debt monkey off of our financial backs.
I hope you have also found ways to set yourself for financial success, as there have been many opportunities within this pandemic to do so. I appreciate that SO MANY were furloughed, fired, got sick, or whatever, and many are still out of work and struggling. My wife and I have been blessed to be “essential” during the pandemic, with very little changing to our salaries and benefits. With that said, there have been many opportunities to get your finances, including paying down your student loan debts, in better shape for 2021 and beyond. I’m talking about relative changes and incremental wins, as I understand that most are not in a position to pay down large sums as we have.
If you fall into a high-income bracket, have kept your job throughout the pandemic and you haven’t made some serious headway on your student loans, then picture me face-palming. On the bright side, you have the rest of this month (and now January 2021) to get the ball rolling towards financial freedom, but the window of opportunity may be closing at any time. Whether paying down the principal of your loans within the setting of zero interest accrual, or just increasing your savings to be poised to make larger payments in 2021, or increasing your savings and investments while the number of PSLF qualifying payments ticks up, these are all wins. But, if you’ve been working this whole time and haven’t made some headway, maybe even spoiled yourself on a few big-ticket items, then you really missed a golden opportunity. You likely have cost yourself thousands, possibly hundreds of thousands or even millions, mostly to future interest accrual on your debt and missing the opportunity of compounding interest within the next few decades.
I want to offer this great Chinese proverb I read the other day, which really applies to investing and the power of time to grow: “The best time to plant a tree was 20 years ago. The second best time is now.”
Not everyone has the time or mental bandwidth to do a deep dive into investments, financial independence, loan repayment strategies, etc., but the good news is that you really don’t need to be an expert. As clinicians, we routinely recommend our overweight and obese patients focus on lifestyle changes, specifically eating a healthy diet and getting some physical activity. It’s a simple formula that works. Well, the simple formula that works for paying off debt and becoming financially independent is: spend less –> save more.
Another financial opportunity in this pandemic has been how travel and other restrictions have potentially decreased discretionary spending. My wife and I, given she is working remotely at times, are saving money on fuel, travel, car maintenance, etc. We were supposed to take a trip to Italy this past summer, which of course got canceled, so we’ve taken the money we planned on spending and invested it…with compounding interest, that $5,000 will become $20,000 in 20 years. We know that given our relatively high savings rate, we will rebuild the travel fund for when we can safely take that trip, and much of that will come from the discretionary savings I listed above. Just a simple redistribution of the money will fund a half-year of retirement for us, or maybe some college funding for our future family.
Taking many incremental steps forward with your financial futures, including reducing student loan principle, redistributing money saved to investments, optimizing asset allocations in your retirement accounts, and just simply spending less and saving more, are all opportunities that have been ripe for the pickings during the pandemic. There are enough of these golden opportunities that are ever-present, pandemic or not, and these can be leveraged to pay off your debts and increase your savings/investments…all on the path to becoming a financially independent millionaire. (this is not hyperbole, just take a look at a compound interest calculator)
Big picture: The pandemic has been tragic, frustrating, anxiety-provoking, exhausting, heart-wrenching, and long, and on it goes for an unknown length of time…all of this has been blatantly obvious. Less obvious have been the opportunities to take steps and even leaps forward on various parts of our lives, including our state of financial well-being. Some of these opportunities will be unavailable after a period of time (CARES Act), but the majority are ever-present and can be leveraged at any time. Take it from me, who at my core is a financial novice who likes to “Geek out” about this stuff…taking control of your finances is incredibly empowering and this feeling of being the Captain of our ship during some rough seas has been both valuable and invaluable.
DISCLAIMERS: 1) The views expressed here are my own and do not necessarily represent the views of my employer. 2) There are no conflicts of interest to report. 3) I don’t know what I don’t know, so feel free to message me if you don’t agree with something that you read.
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