This is a guest post by Dr. Cory S. Fawcett. He is a retired general surgeon and is now a personal finance coach for doctors. I love his book The Doctors Guide to Eliminating Debt.
Many doctors mistakenly think they can acquire more stuff if they use debt. That is a great deception put forth by those who want you to borrow money from them. They tell you that for an easy monthly payment, you could be driving that new car. They never talk about what you are giving up by borrowing the money.
There's No Such Thing as a Free Lunch
We all know there is no such thing as a free lunch. So why do we look at debt as a free lunch? We think it is easy to just sign on the dotted line and drive off with that new car, boat, motorhome, vacation house, or wedding. I can have it now and it will only cost me an easy monthly payment. Doesn’t that seem like you are getting a free lunch?
It reminds me of a story from the book, End of The Spear, by Steve Saint. Steve brought a man from the jungles of South America to the United States. This man had never been out of the South American jungle where he grew up. When he returned home he described what he saw on the trip to his friends. He recounted their grocery shopping trip as putting all you want from a big room full of food (grocery store) into a cart. Before taking the food to the car you just smile at the lady (check out clerk) and she lets you take it all home. Then Steve explained to him that he had to first give her his credit card before taking the food. The native said, yes but then she just gives it back to you.
The native got the impression that he was getting the food for free. He didn’t understand the concept of a credit card or borrowing money. Sometimes I think we don’t understand the concept of a credit card, or the consequences of going into debt.
Easy Monthly Payments Are a Myth
Borrowing to buy stuff doesn’t gain anything, it causes a net loss. You do get to have the item now in exchange for giving up some of next year’s income, plus interest for the life of the loan. So what happens next year? You will have less money to live on because part of your earnings are already spoken for to make the monthly payments on debt you acquired.
When we take this to an extreme, we go into debt for schooling, two cars, a house, a boat, a vacation, and several other things. Then next year comes along and demands we make those “easy” monthly payments. These payments can quickly add up to $6,000 a month of our take home pay. Depending on our tax bracket and which state we live in, we may need to earn a monthly gross income of $10,000 just to make the debt payments on our past purchases. That is $10,000 a month of earnings that will not be available to spend this year. Our lifestyle will be cut back because of this debt. A net loss.
The consequences of that debt are a loss of valuable options of how we will spend this year’s income.
The need to keep production up to meet this added burden can be taxing. We are tempted to work extra shifts in order to afford the other things we want this year. Those extra shifts add up to losing even more family time than the considerable amount of time our regular job keeps us from our family.
Debt Keeps Us Chained
We might be pressured into taking extra call to bring in more money. We might be tempted to work when we are sick and should be home, all because we need the extra money.
What about when a doctor gets pregnant and is having trouble in her third trimester? She needs to cut her hours so she can have more time off her feet, but she can’t afford to cut back as she needs to make those debt payments.
Then, she wants to spend more time at home with her newborn after delivery. But since maternity leave is unpaid, she can’t afford to take the time off she desires because those debt payments are hanging over her head.
When it is time to renew her contract and the hospital decides to cut her pay, she just signs the contract and grumbles. She really needs this job to make her payments and she doesn’t want to make waves that could risk losing her job.
Debt Robs Us of Time
When vacation time rolls around, we might stay home and work to cover the debt while our family vacations without us. Wouldn’t they rather have us there with them? Would they have traded whatever was bought on credit to have us with them on vacation? Will we still like the trade we made?
About now, the things that were bought in the past are not looking so enticing. The obligations and loss of freedom they are causing is worse than the small amount of joy we got by having those items a little bit sooner. We are now realizing that if we would have saved first, and purchased these items with cash, we would be much happier, less stressed, have more family time and in general be more fulfilled.
As a young surgeon I did not like doing vascular and thoracic surgery. I only did those operations because they paid well, not because I liked them. I was afraid that if I stopped doing them, my income would drop and I wouldn’t be able to make my debt payments. My debt was making me do things I didn’t want to do.
After I became debt free, that fear of not making the payments was removed. I decided to take the plunge and drop those cases I didn’t like. I was not afraid of losing my home anymore. The funny thing was, my income didn’t drop. Those cases were replaced by other cases I liked doing and my practice became more fun for me.
All those years of doing cases I didn’t like could have been avoided if I hadn’t stuck myself with all the debt. Debt robbed me of some of the joy of being a surgeon.
Getting Out of Debt
After I was debt free, I took a lot more time off. I didn’t feel the need to produce so much. I was able to become a soccer coach for my kids. We were able to go on a three week vacation every summer. I had a new sense of freedom.
So what is debt stealing from you? The ability to work on your terms? Time with your family? Vacations? Coming home for dinner every night? Peace of mind? Full use of maternity or paternity leave? Or a good night’s sleep?
Think long and hard about the items you bought on time. Are they truly worth the cost you are paying today? Are they worth the cost your family is paying?
For me, the answer was no. In 2001, we paid off our last personal loan, which was our home mortgage, and have never looked back. I do not intend to become a slave to debt again. The relief I got when I became debt free is hard to explain. It was much better than I anticipated. The thief was sent out of my life.
Stop managing your debt and start eliminating it. Pick up a copy of my book The Doctors Guide to Eliminating Debt and begin transforming your life. Without debt, many more options open up to you and your family. Debt is a thief and you don’t need to give him the keys to your home.
Dr. Cory S. Fawcett is a retired general surgeon who now teaches doctors the ins and outs of personal finance though his business Prescription for Financial Success. In addition to his blog, that can be found at DrCorySFawcett.com, he has written three award-winning and best-selling books including: The Doctors Guide to Starting Your Practice Right,The Doctors Guide to Eliminating Debt, and The Doctors Guide to Smart Career Alternatives and Retirement.
Are you a doctor trying to get out of debt?