I was in a decent amount of debt a few years ago, mainly from credit cards and a car loan. It started a few months before medical school and tailed off around the end of my second year. At that point, I got a small job on the side, made a budget, and stuck to it for about 14 months until all of my debt was paid off. This was no easy task considering I had a fixed student income. After the debt was paid off, my budget-spending relaxed somewhat, but I was able to curb my spending enough to keep myself out of debt. I did learn a valuable lesson about being in debt. It’s soul-sucking, and I never wanted to be in it again.
Unfortunately, the problem arose again recently during the tail end of medical school, although not nearly to the same extent. My student loans only covered living expenses through the end of May, and my first paycheck did not come until the end of July. I built up a small amount of credit card debt from moving expenses and living expenses that absolutely have been curbed by the fact that I read I Will Teach You To Be Rich. I am also proud to say that I did not take out any residency interview and relocation loans.
After getting my first paycheck, I eliminated this debt by foregoing some savings for one month, specifically saving for long-term investing and pre-paying my student loans. While I am disappointed that my investments will suffer, I am happy that this debt is small enough to be easily eliminated.
I’ve taken a few precautions to avoid future debt mishaps. I started an emergency fund, and my goal is to slowly save enough to cover three months worth of my new salary. This is a bit slow-going at the moment since I’m simultaneously trying to save for a wedding during the next year. I also took Ramit’s advice and added a “Stupid Mistakes” entry into my Conscious Spending Plan. He recommends adding a buffer of 15% of your fixed monthly costs that can be used when you forget to save for or budget for something. I plan to transfer the remainder to a separate savings account. Every six months or so, I’ll figure out what I should do with the excess. I’ll probably transfer most of it to my emergency fund and spend a little!
I’m doing my best to stay out of debt in the future. Unfortunately, med school loans are my next major soul-sucking debt. If you or someone you know is in debt, suggest they change their behavior to get out of it as soon as possible. Give them a copy of Ramit’s book, or even just talk to them about their debt. Many people think they can’t get out of it. Others don’t even understand that it’s a problem. It takes discipline to pay off debt, but only then can you start to plan a secure financial future.