Tim Dickerson, DVM: Kickin' butt and takin' names
Graduation year: 2008
Total debt in 2008: $120,000
Dickerson is a private practitioner in Clovis, N.M. He went to work immediately upon graduating, and his approach to student debt has been nothing other than to bury it as quickly as humanly possible.
Dickerson approached a financial counselor after graduation. The goal they agreed on was to get rid of the debt in 10 years. The first step was establishing a 12-month emergency fund, in which he included ongoing loan payments at the 10-year rate. The second step was putting together a monthly budget. Even tougher than that, he had to stick to the budget.
What was Dickerson's motivation for the quick payoff? He describes it as lunch money. He calculated the daily interest accrual on the student loans to be $22 to $24 each and every day. That was his lunch money (and a pretty nice lunch at that), gone before he ever got to taste a bite of it. And it added up to about $8,000 yearly.
Dickerson's list of sacrifices to make the payoff happen makes complete sense. It's his extreme discipline and follow-through that earned him such success. He didn't go on expensive vacations but still enjoyed a three-week vacation every year at the beach in his hometown in Florida. He was able to cut costs by staying with family. Budget groceries included Hamburger Helper, soup and sandwiches. Forget about the fun devices and tablet computers. Dickerson was wholly dedicated to not living on what is perceived by many to be "a doctor's salary" and not trying to portray a "doctor's lifestyle," when he knew that wasn't the reality of his situation.
Dickerson laid down some fantastic advice that all new graduates should take note of: The emergency cash fund is crucial. If you don't have it on graduation day, use the six-month grace period to save up as much cash as possible before the first payment comes due. Dickerson also sold assets that he didn't need prior to starting the new job. "If you still don't have that emergency fund, make minimum loan payments and save more until you do," he says. After that, Dickerson didn't see raises as an opportunity to raise his lifestyle standard. The raise was an increase in his debt-paying power. Any "extra" funds that came in such as gifts and tax refunds were not seen as an excuse to spend more. Those went immediately to the loans.
Dickerson took one measure that even I thought was extreme. He put up a white board in plain sight that he could see every morning when walking out the door to go to work. The board showed his total debt, outlined his monthly budget and loan payment amount, and served as a constant reminder of the mountain left to climb.
Whatever Dickerson's motives and strategy were, he has far exceeded his goals. With his payoff efforts snowballing, he found that he was able to ramp up the payments more and more. In 2013, only five years after graduating, Dickerson has completely paid off his student debt. Paying it down in five years compared to 10 amounts to an extra $24,000 of interest saved. By investing that same $24,000 with an average return of 4 to 10 percent (I have chosen a broad range to reflect the uncertainty we are faced with currently) during the next 30 years, it would translate to an extra $80,000 to $480,000 in his retirement fund. Or, if you take a more conservative approach to saving, that's still $24,000 stuffed in Dickerson's mattress at retirement.
Dickerson is now ready to move on with his life after loans, but he's not taking anything for granted. There is no plan to buy a yacht and sail the world. He still feels that he has a lot of ground left to cover before taking a breather. "Compared to people who entered the workforce at 22 years old and immediately began saving for retirement, we still have a lot of catching up to do," he says.
I think Dickerson's extreme efforts and discipline are a blueprint for the type of plan that new veterinarians need to be able to adapt to if they wish to secure a more stable financial path in life. But we should keep in mind that that's only the very first step. Dickerson's point about compounding retirement savings should be well taken. He and I agreed that in the current economy, there is no safe investment or retirement vehicle out there that will provide a larger return on investment than the guaranteed decreased cost when you eliminate the interest accrual on those loans right now.
Dr. Jeremy Campfield works in emergency and critical care private practice in Southern California.