The Dangerous Student to Doctor Transformation
This post is from fellow optometrist and personal finance blogger, Syed at The Broke Professional. Thanks for helping me out while I navigate the no wifi land of rural Kentucky!
When I was in school, nothing else mattered. Life was all about doing well on the next test, and then doing well on the one after that. This was true both during undergrad and optometry school, and it seemed like no end was in sight. Though I knew it would end at some point, it was always “how do I get ready for the next test or practical?”
Many of my classmates in optometry school felt the same way. Professional school is similar to undergrad in that you want to get good grades and do the best you can, but it’s different because you and every other student in your class is there for one reason and one reason alone. And you attend classes and take board exams with the same group of people for four years. This can build a lot of camaraderie and produce a sort of “us against the world” mentality over time.
A Whole New World
But then after four years, it’s finally over. We dealt with endless tests, nerve wracking practicals, monstrous board exams and professors with giant heads. The long and seemingly unending battle has been won, and now you get to enjoy the fruits of victory. Right?
After living like students and “roughing” it for four years or more, this is where many people lost their way. I talked to classmates who struck deals on new luxury cars, big suburban houses and long European vacations. All before even getting their licenses! I didn’t feel much different from the day before graduation to the day after, but there is something about finally becoming a professional that makes people lose their financial sensibility.
Once you leave the protective bubble of school, there’s a whole new world out there. And it preys on people who make high incomes. But especially on those who “think” they make high incomes. Don’t get me wrong, an optometrist can make a good living for themselves and their families. But not right out of the gate. Not only are you probably making the least amount of money you ever will during your career, but the expenses start rearing their ugly heads. Car payments, mortgages, licensing fees, association dues, transportation, equipment and a new wardrobe are just a few of the things you have to start paying for. If you’re not careful, you can be drowning in bills in no time.
Brace Yourselves
And many people forget the big bill that’s been lurking in the background under the guise of a “grace” period: Student loans, nothing graceful about student loans in my opinion. Most new graduates have some amount of student loans to pay back, and some have a whole lot of it. Student loans are usually the biggest expense for new grads, and the one they plan for or think about the least.
Remember those student loan letters you used to get? The ones that ecstatically stated that you were approved for a boatload of money? Most students just glance at it and sign it. They gladly take all the money for reasons that are unknown to me. Maybe they’re too lazy to read it. Too lazy to make sure you don’t get stuck with a decade worth of debt? Or maybe they feel they deserve it. So you deserve putting your future self, and possibly your family, at risk because you made it to professional school? Or maybe they just don’t know better. Well that ignorance will cost you hundreds of thousands of dollars my friend. The inability to budget student loans effectively during school can produce a world of hurt once they become due.
Take it Slow
So what’s the fix? Students and new grads have to realize that receiving your license does not mean you have a license to spend more, but a license to work. With easy access to credit and financing available for nearly everything, falling into a pattern of lifestyle inflation is very easy. But making slow changes over time to the things you value is a much better strategy.
For example, ditching your old car (which runs perfectly fine) right after graduation for a shiny new Mercedes is not smart. You automatically have to pay a higher monthly payment and likely pay more for insurance. This also starts you into the habit of making large monthly payments on automobiles, making it seem an “okay” thing to do. After all, everyone else is doing it too. While I’m not suggesting you drive your old car around until parts start falling off, just ease the transition and wait a few years before getting your next car (and make sure it’s fuel efficient).
Get the important things done like pad your emergency fund, start investing, build up a great credit score and formulate a strong student loan payoff strategy. Cars and houses are not going anywhere and deals will always be there. As long as you keep your financial priorities in order and try to increase income and decrease dent over time, you will be setting yourself up for success.
Syed is an optometrist who is trying to help students, new grads, and established professionals learn about the basics like saving, investing, student loans, and making the best financial choices. You can find him at The Broke Professional.
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I have seen it so many times. Students become doctors and suddenly have the paycheck of their dreams. Somehow they seem to forget about the hundreds of thousands of dollars that they owe and they begin rewarding themselves for all of their hard work. A large house, a foreign luxury car, and other unnecessary conveniences – these are often the pitfalls of doctors. They life becomes large, but so does their debt.
This is sound advice, and basically the traps you mention above happen to the majority of students who recently graduate. Like the new car, fancy house, and vacations all within a few years from graduating. ITs pretty unbelievable how heavily marketed to students are, and not financially educated at the same time.
That’s a dangerous combination indeed. Students are usually focused on doing well in school, so a lot of times financial decisions can go by the wayside. Thanks for the comment!
I have many doctor clients and the biggest mistake that I see is lifestyle inflation upon graduation. I think that student loans are preventing this from happening as extensively as it used to, but it’s still a problem. It’s especially difficult because the “Jones” effect seems to be particularly strong amongst doctors.
Keeping up with the Joneses is strong indeed. I have an MD friend who says his colleagues chiide him for driving a Camry. It’s brand new too! Thankfully he doesn’t listen to them. Luxury cars are a huge money pit. Thanks for the comment Shannon.
I made the same mistake. No, I didn’t take out too many student loans, but I did spend, spend, spend money I didn’t even really have yet after I graduated. This inflated my credit card debt quickly and got out of control. Now I’m going to be paying back this debt from those purchases for the next 2-3 (or more) years. Ugh!
Luckily credit card debt is something I’ve been able to avoid personally, but student loan debt can be rough as well. While the interest rates aren’t nearly as high as credit cards, the sheer time ti takes to pay off professional school loans can dishearten many people into just paying the minimum and forget about it. But with both credit cards and student loans, it’s important to attack those high interest loans so you can save a lot of money on interest payments. Thanks for the comment Kayla.
I think there is something about that first professional job that does make our eyes glaze over. They need to add one more class to everyone’s studies right before they graduate, and it would be called, “welcome to the real world.” A way to ease the transition between student and professional so everyone doesn’t go hog wild! 🙂
This! I agree if we had a class about real life as an optometrist it would help a lot of people. We had some class by the financial aid director but it was pretty much a talk about how to find out how much we owe in loans and to keep donating to the school after we graduate. Because spending over $100K in tuition is not enough support apparently. Thanks for the comment Tonya.
Your point about taking it slow is spot on Syed. I understand, on one level, the desire to upgrade after going through extended school like that but the focus has to be on the long term and what those upgrading decisions will do to impact your immediate and long-term future. I know it can be easy to rationalize assuming a nice salary but rationalization can become a huge slippery slope.
It can become a slippery slope indeed. And quickly. First there’s a car, then a house and then all the gadgets. Having a great income right out of school can be great, but so can the pitfalls. Thanks for the comment John.
Doctors may have high incomes but I imagine the loans are monstrous. I can’t imagine succumbing to lifestyle inflation with those kinds of debts hanging on me.
You would be surprised Stefanie. The allure of luxury cars and flashy vacations is just too much for some. And I’ve noticed once you go luxury, it’s hard to go back. Thanks for the comment and happy new year!
I kinda miss school Kim. I miss those nerve-wracking tests and listening to professors. I also miss my classmates. By the way next year I will be able to finally pay off my student loan. Yes finally! I pay as much as I can to pay it off sooner than expected. Happy Holidays!
School definitely had its high points. I especially enjoyed the fitness center. Congrats on being able to pay off your loans! Thanks for the comment.