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 dvm360.com/campfield for details of my "death to debt" plan.)
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.
Why all this debt babble?
Ultimately the point I'm making here is that, currently, we're not all that bad off as a profession. The worry is that if we decide to remain complacent—to leave the problem to manage itself—we could quickly approach a situation where veterinary medicine becomes a financially insensible career choice for many bright and able young students.
So what can you and I do about all of this? Probably not much. We have leaders at the AVMA and other organizations working hard to ensure a bright future for our profession. What I aim to do for myself, and what I hope more veterinarians will choose to do, is to break the debt cycle early in life. Those student loans are the first and most substantial debt burden that most of us will sign up for. Soon after that, we will consider business loans, car payments and, very likely, a home mortgage.
But if there's a silver lining to student loans it's this—very early in life, we get to know what it means to sign on to more than $100,000 in debt. We know what it means when we decide to sign for that $300,000 home mortgage. I recently looked into purchasing a home. What an eye-opening experience! My real estate agent and mortgage lender assessed my situation and suggested that I could afford more than I thought—that a $400,000 home was well within my reach. I just needed to sign a few pages here and there and I'd be into my dream home in no time. No thanks.
A look at the big picture
There's a broader picture to the debt fiasco as it relates to most of us. In terms of providing pet care as a cash business, some may say we're at the mercy of the economy. So let's look back and consider the nearly $2.8 million in U.S. home foreclosures that took place in 2009. I'd bet very few veterinarians owned any of these homes. So why does it matter? Why should we care that so many "irresponsible borrowers" could no longer make ends meet and make that mortgage payment? Because they're our clients.
I subscribe to the notion that as veterinarians, we're not the guardians of our clients' finances. And I certainly try to distance myself from pet owners' financial decisions in practice as much as possible (Fire off the estimate and let the receptionist handle the rest!). Yet how many times in your own exam room have you heard, "I've been out of work for a year. I can't afford to treat Max. I'm going to have to put him down," or, "I just lost my home and moved back in with my parents. I need a cheaper treatment option."
I hear those scenarios every single day, usually more than once. And I bet you do, too. For some of us in practice, the attitude that the pet owner's problems aren't our problems and "we do what we can" is adequate. Others among us cannot turn our backs on a patient and are willing to risk professional burnout, not to mention giving away our business to help those in need. There are no easy answers here.
We want to better the lives of our patients and our clients. We also depend on pet owners who are willing and able to pay for our services. I view our own difficulties with relatively manageable student debt as an indicator of a much larger-scale problem. I'm not suggesting that any drastic measures be taken in terms of how we conduct our business. I'm just stating that we should be paying attention to these issues and how they might affect the whole of our profession.
I've said it before and I'll say it again—all of our situations are so different that no single financial plan is right for all of us. By all means, if you have an investment prospect that's going to earn you a rate above what you are paying on your loans, go for it. In the current economy, if you have such an investment opportunity lined up, please also contact me directly—I'll send a check right away.
Dr. Jeremy Campfield works in emergency and critical care private practice in Southern California. He is also an avid kitesurfer.