Following your dream to become a doctor led you to medical school — and a substantial student loan payment for the next 20-30 years. But with this massive debt looming over your head, it can be hard to feel financially secure, no matter how much money you’re bringing in each year.
You’ve researched financial wellness, and you know the importance of saving money for retirement and an emergency fund. But you’ve also read other expert tips that warn against building a nest egg when you still have debt. What’s a hard-working, forward-minded physician to do?
The reality is that it’s possible to find a balance between paying monthly student loans and saving for the future. Here, we’ll explain how to do this and why it’s crucial that you use each penny you earn effectively.
1. Check the Terms of Your Loan
Before you take another step forward in your fiscal analysis, what’s the interest rate you’re paying on your student loans? If you don’t know, find out. It may be possible to refinance them to save thousands of dollars in interest over the course of your loan.
However, be cautious of refinancing if you’re working in the public sector and have a federal student loan. In that situation, once you’ve completed ten years of public service and made 120 qualifying, on-time student loan payments, you may be eligible for forgiveness of the rest of your debt through the Public Service Loan Forgiveness program. This is not available for private loans.
Regardless of whether you stick with your current lender or change to someone with more favorable terms, make your minimum monthly payments. Since this loan is substantial, paying extra to the principal right now won’t help as much as using those funds to cover the rest of your high-interest debt, which we’ll discuss next.
2. Compare Your High-Interest Debt
The tips you’ve read suggesting paying off debt before you start investing in savings aren’t wrong; they’re just not referring to your low-interest student loans right now.
Instead, these financial experts remind you that if you’re paying the standard 18-29% APR on credit cards or carrying a 7% interest rate for your car, those are the debts that should be paid down first.
Take any extra funds you want to invest or put in savings and use them to get rid of high-interest-bearing debt. When you’ve paid off your creditors, you can begin the fun journey to saving for the future.
3. Meet With a Financial Advisor
At any point in your career, sitting down with an expert in physician wealth is a wise idea. But it can be particularly beneficial at the beginning stages when you can harness the power of things like compound interest and market volatility in your favor.
Financial advisors who specialize in helping those in the medical profession know the ins and outs of investing and can offer you insight that works uniquely for physicians. Your advisor will guide you as you determine which bills to target for debt payoff, how to build an emergency fund, and how much to contribute to your 401(k).
As you get more comfortable with saving money, you’ll learn the importance of a traditional or Roth IRA, high-yield savings accounts versus Certificates of Deposits (CDs), and hedge and mutual funds.
Each of these has its own advantages and disadvantages that help your money work for you, such as tax deductions or deferrals. For more information on physician investing opportunities, read this article by OJM Group.
4. Pay Off Your Student Loans When Your Money is Allocated Wisely
Now that you’re in a firm financial standing, debt-free, and letting your surplus funds grow in investments if that student loan debt is still nagging you, you can address it.
Use a student loan calculator to determine how much you need to pay each month to get rid of your debt by your goal date. Remember that paying anything extra is going to expedite your payoff.
If you can’t double your payments or hit the calculated target, be sure to make your payments early to reduce interest. Pay as much as you can, and any extra will go toward the principal, lowering your overall balance due.
Conclusion
Finding ways to balance preparing for a healthy financial future while carrying a hefty medical student loan debt is possible. With these tips, you’ll know how to allocate your money to ensure it’s going where it will help you the most.
Other Articles
How can professional negligence claims be prevented?
How to Reduce Stress And Anxiety of Employees?
