There's no organization called
Doctors In Debt -- but there could be. Physicians are
under considerable pressure to live up to the image.
That can be expensive. There are plenty of people out
there who are ready to lend you money to make up any
shortfall between your annual expenses and your take-home
pay. And that adds up to something no MD wants but many
have: debt.
The problem is particularly acute
for doctors under age 40. Student loans and the cost
of buying a first home can push you to the wall in your
first few years of practice. And there are plenty of
other things to spend your money on: practice start-up
expenses, a decent car after the rattle-trap you drove
in med school, a much deserved vacation or two. It's
estimated that about 40% of younger doctors are carrying
more than $250,000 in debt and that goes above $500,000
for about one in 10.
DEEP
IN DEPT
How much debt is too much? The rule of thumb is that
monthly debt payments should be about 40% of your income
-- including student loans repayments and annual mortgage
costs. You can carry more but if the figure is above
60% you're likely in financial trouble. You may also
find it's hard to handle psychologically.
So how do you get out from under
the weight of your repayments? Here are some tips to
help you on your way to financial freedom:
Divide and conquer List
your monthly expenses, categorize them and then follow
them closely month to month. Separate essential expenses
from the "nice-to-haves" and reduce the latter. Smaller
car, fewer meals out, less impulse spending and so on.
Review your loans Plan to
pay off those with the highest interest and the shortest
terms first. On credit card debt (a bad one for the
profession) consider transferring all your debt to a
single card that offers the lowest interest rates --
then throw away the other cards and lock the new one
away in a drawer marked, "For emergency use only." Finding
that perfect card is a bit of a chore. You might want
to begin with your own bank manager. Don't call a credit
card company, they'll only try to sell you on their
card.
Use your house Another option
is to borrow on the equity in your home. Interest rates
are low and the housing market remains strong in Canada.
You don't have to look far to see what can go wrong
with this lending market, but the US implosion of subprime
lenders is unlikely here. It's sobering to remember,
however, that mortgage lenders can and do take your
house if you miss too many payments.
Keep the taxman at bay Owe
money on your taxes? Talk to an accountant who knows
how to talk to the tax people and come to an arrangement
-- it can be done. Tax collectors have too much power
behind them to be trifled with, so do what you can to
appease them.
Don't forget school The
one thing to remember about student loan repayment is
to never let your account get more than 269 days in
arrears. On day 270, your loan gets turned over to a
collection agency and the real nightmare begins. There's
no magic bullet to student loan repayment but you can
find some relief and lots of advice at http://www.hrsdc.gc.ca/en/learning/
canada_student_loan/index.shtml.
Once you get your debt under control,
stay with the program -- you'll find it's easier to
sleep nights.
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PERSONAL FINANCE
