Fact: Debt doesn't discriminate

Fact: Debt doesn't discriminate

Veterinarians aren't the only ones saddled—our clients deal with it, too.
Apr 01, 2013

So here's the update you've been waiting for. Is it working? Is my insane plan of cutting spending, implementing lifestyle changes, ramping up savings and paying down more debt worth it? (See the May 2012 issue or visit http://dvm360.com/campfield for details of my "death to debt" plan.)

The answer is yes! Well, maybe. I made only three student loan payments in 2012. But they were big. Compared with the start of 2012, I'm kicking off 2013 with a student debt burden that's down by 28 percent. For me that's huge, and I finally feel like I'm getting somewhere.

Now, I did experience a salary increase since I've been working more and our caseload has increased. And just in case you were picturing me huddled over a garbage can fire under a freeway overpass on my nights off, I did splurge a little bit this year. I pursued some of my passions, engaged in some relaxing time off—heck, I even sent a few gifts to my family for the holidays. But I was able to do so within a defined budget I set before making those expenditures. The real changes I made in managing my finances weren't easy, but the results have been real.

Chipping away at the numbers

I recently had the opportunity to pose some questions to Robert Coleman, a wealth management director in Northern California who's been on Barron's annual "America's Top 100 Financial Advisors" list for several years.

I briefly outlined my "sacrifice and pay down debt" plan to him. Mr. Coleman responded first by stressing the importance of maintaining an emergency cash pool of funds. Duly noted.

I then showed him my loan balances and consolidation rates. In my case, the smallest of my three consolidated loans is at the highest rate (6.5 percent). And that's precisely the one he suggested I go after first. "High rates are high rates," he said. "They're costing you the most per marginal dollar. Also, it feels good to pay off a loan and gives other lenders evidence of your intent to pay off the other loans. Paying off a little here and a little there doesn't leave anyone feeling satisfied."

Heeding Mr. Coleman's advice, I made sure to establish a comfortable cash reserve, then I continued to go after the student debt. I finished 2012 with a payment of more than $10,000 that completely paid off the smallest of my three consolidated loans.

I can't describe the sense of accomplishment I got from seeing one of the loans completely disappear from my balance sheet. Now that I've eliminated that loan, around $2,000 of my income will stay in my pocket instead of going to the government as loan interest during the next six years.