Sunday, March 19, 2017

Education Debt IS Bad Debt


I was recently given some bad advice.

I am deeply, profoundly, eye-wateringly in debt thanks to four years of international medical student tuition and a penchant for expensive wines, perfumes, and restaurants.

I come by it honestly. It stemmed, initially, from being a medical student and spending a thousand euros a week on tuition, for four years. Why would I buy a 10 euro bottle of wine instead of a 20 euro bottle of wine? That ten euro difference was not even a drop in the volume of money I was hemorrhaging at the time.

Then it morphed into an easy justification. I had no life as a resident. I worked, slept a little, ate when I could, peed when I could and I was going to have that cashmere sweater from Club Monaco dammit because I had nothing else in my life at the time….nothing!

I could say that I had made so many many sacrifices; my income, my freedom, my country, my relationships, my RRSP’s, my whimsy. Didn’t I deserve that stay at the Fairmont? That 7 course meal at Quattro? That bottle of Veuve demi sec? HECK YES I DID.

So, now I am finished residency. I am actually an attending physician, making more a month than most people do all year. Yet I am broke. Why? Well. That begins with one’s definition of “broke”. Because, I used to think that rich was how much money you earned, not how much money you had in the bank.

I have over $300 000 in debts; student loan, line of credit, and Bank of Mom debts. This means that I have no money in the bank. I am broke. And every 2 weeks when I get my pay check I continue to be broke.

I was recently told by a financial advisor that I didn’t need to worry so much about my $190 000 line of credit debt because the interest rate was at prime. I told him that I was about to go on this mission to just pay that debt down as fast as my little surgical fingers could spin that money out.

Meh. He said.

That is low interest debt. Put money into savings, buy RRSP’s, save up for your next house downpayment. Pay that debt down at a rate that works for you. (No, he is not given kickbacks by any financial institution that I am affiliated with). And I was lulled into believing this. I can afford the payments therefore I can afford the debt.

Oh FUCK NO.

Ok, let me put this into recent context.

I’ve been doing a lot of reading and thinking and learning about the concept of minimalism, money management, debt repayment, financial freedom, need, greed and when I'll be able to step away from mandatory employment. 

As part of this quest I watched this interesting documentary about minimalism, started listening to their podcast* as well as the Dave Ramsay and Planet Money podcasts. I read "Your Money or Your Life" updated by Vicki Robin, as well as "Total Money Makeover" by Ramsey, and am currently reading "Beyond Wealth: the roadmap to a rich life" by Alexander Green. I listened to a mind-blowing interview** with Mr Money Moustache and have since spent hours and hours reading his blog and putting his advice into action.

I downloaded a free budgeting app called "Everydollar". I also downloaded a frighteningly sobering app called "Debts Break" which shows you how much money you are paying on the principle, how much interest you are paying each month, and how much total interest you'll pay by the time the debt is paid off. 

After this flurry of reading, listening, watching and information absorbing I felt as though I had been awoken from a long, dreamy, line of credit induced financial stupor. It's embarrassing to admit how little I understood about these basic concepts of personal finance and the greater concept of money. There are so many gems I've collected in the resources listed above that I would do no justice to any of it if I tried to summarize or recap. But I will say this, if you are in debt (even a little bit) I urge you to check out some of the links above and start your own journey into mindful spending, debt control, and financial independence. 

AND GET RID OF YOUR DEBT BEFORE YOU DO ANYTHING ELSE. 

I shudder to think of how much money I've already wasted in ridiculous interest payments (not to mention all the brainless cash I've thrown out for acquiring things I didn't need). 

We've gone into basically a spending freeze here in the Blackbear household. My husband even took a job nearly 3 hrs away in order to beef up the "hammer the debt" campaign. We are getting out. It's not going to be easy and it's not going to be quick but man I am so glad that I only wasted 6 months as an attending before I started this new way of thinking. 

The main change to spending has come, not from just stopping the spending of money (which is like just deciding to crash diet - a temporary deprivation which will eventually rebound and probably over correct in a bad way) but of changing the way I look at how I spend my money and my relationship to money. 

I do the Mr. Money Moustache and minimalist approach before I buy anything. 

1) is this purchase adding a positive or taking away a negative in my life?

If it is the former then it is not allowed. It is easy to think that adding a nice sweater will make me happier (for about 30 sec) but it is really the false belief that it is adding a positive. If the purchase is taking away a negative, i.e. I have no winter coat so I will buy a good quality winter coat that I will treat well and cherish and wear for years, then I can buy it. 

2) Is this purchase worth my freedom?

Okay, I know what you are thinking. That is a bit over the top. But it isn't. Currently I am a slave to my debt. I will HAVE to work for years and years just to pay off my debt, not just to live, travel, eat, drive...So every dollar I spend is a dollar I am not paying onto my debt, which means I continue to protract my debt repayment servitude. Prolonging my required employment. 

3) Is there room for this item in my life? 

I hate having stuff I don't need or use in my life. I did a giant Mari Kondo purge last year which was so liberating. Now everything I bring into my life has to have a purpose, a physical space. 

4) Is this worth my life energy?

This sounds really flaky, I know. But, you have to listen to "Your Money or Your Life" to get the full gist of this one. It boils down to this; money is what we are given in exchange for working. Work is the concrete expression of our life energy, which is then converted into money. So, essentially when you spend money, you spend your life energy. It's an interesting way to look at money in a more abstract way and to see that our life energy is finite (like our years of existence on the planet) so how do you want to spend that finite resource. 

I know this is a bit of a long post and I am sure that I have lost many readers at this point for a variety of reasons, which I totally accept. I wouldn't have been ready to hear any of this before I was GOOD AND READY and it was seeing the totals at the bottom of the screen on my debt app which really propelled me into action. I also accept that I am probably the stupidest person on the planet when it comes to finances so I am hesitant to even elucidate how I am dealing with my money situation now, though I think I am on a right-ish track. 

I felt the need to write this post though because we are given so little information about any of this as physicians (and just humans in general) that if some of this sparks and interest (or outrage) in any of the readers of this blog then I am beyond delighted. 

I'll keep you posted on my progress and how the process is going.

The devil is in the details.


* I love these guys and their blog and podcast are very high yield when you are on a crash course to minimalism and mindfulness. Unfortunately, in a recent podcast one of them mentioned their chiropractor and the other mentioned his adrenal fatigue. Thus I called into question every ounce of wisdom I had taken from them. I have since reminded myself about the concept of throwing out the baby with the bathwater and have come back to allowing that though I will never never never agree with their non-evidence based pseudoscience quackery promotion, I can accept that in other areas they have valuable information and ideas that are worth considering. 

**Tim Ferris. What can I say. I have a love hate with this guy and what he puts out there. I love his work because it has introduced me to fascinating people who have done extraordinary things with their lives. I hate him because he is annoying and markets himself an expert on everything from matcha tea to exercise to boxing to studying to saturated fats to writing. I just can't. Yet I do, and I hate myself for it.