Veterinarians can sometimes get the short end of the stick when it comes to personal finances. High student debt, low starting incomes, and a delayed entry into the workforce all are contributing factors that may hinder your ability to build wealth.
But while the above factors are certainly a reality in the lives of many veterinarians, they don’t have to define you or your financial future. In conversations I’ve had with many veterinarians, there have been a few overarching themes I have noticed, and I refer to these as the ‘5 Financial Sins’
Misunderstanding Your Student Debt
Student Loans, while a necessity for most to attend vet school, can be quite burdensome for many borrowers. Adding to this burden is the lack of education surrounding student loan repayment options. Particularly for those who carry federal student loans, there are a myriad of repayment and forgiveness options available, which in some instances may significantly reduce the total amount you pay over the life of your loans.
The default repayment method for federal student loans is the standard repayment plan, which is a fixed monthly payment that you pay for 10 years. If you can afford this payment, great! But if not, you have other income based options such as SAVE, PAYE, IBR, and others which can reduce your monthly payments and make them more manageable.
Don’t settle for your default plan, do some due diligence on the options available to you and if it becomes overwhelming (which it can be!), reach out to a qualified professional who can help.
Prioritizing Student Loan Repayment over Retirement
Nobody likes student loans, and it can be easy to be of the mindset to pay these off as quickly as possible (which as mentioned above may not be in your best financial interest).
But saving for long-term goals, such as retirement, is also important and the sooner you begin to save, the better.
Look at the graph below. Jack begins saving $200 per month at age 25 and stops 10 years later at age 35, making $24,000 in total contributions. Jill starts saving later at age 35, but continues to make $200 monthly contributions for 30 years until age 65, making $72,000 in total contributions.
Based on a 7% rate of return, even though Jack stopped saving at age 35 and only contributed one-third of the amount Jill did, he still has more saved at age 65. This is the power of saving early and taking advantage of compound interest, which Albert Einstein has been quoted as being the “8th Wonder of the World”.
So how do you find the right balance between student loan repayment and savings? It starts with understanding your student debt and structuring your repayment plan. From there, you can determine how much to save by understanding your cash flow and automating your savings.
If you are using an income-based repayment plan, you may be able to reduce your student loan payments by saving more for retirement, basically a rare win-win in personal finance.
If you hate debt, like me, it can be very tempting to put all available funds toward paying off your student debt and focusing on saving later, but you really can (and should!) do both.
Taking on Too Much Debt Too Soon
Another common financial decision I see many veterinarians make is overleveraging their finances, particularly right after graduating and entering the workforce. And it’s understandable. Eight plus years of school with little to no income and when you finally complete your studies and find a job, you may want to splurge or in some cases ‘catch-up’ to your friends who may be purchasing homes or driving newer cars.
Now, I’m not saying you shouldn’t use your money for your enjoyment. I actually embrace the idea of finding the right balance between spending for now and saving for later. But by taking on additional debt, such as with a car payment or mortgage, not only are you locking in these obligations in addition to your student debt, you are limiting your options for the future.
If you are thinking of becoming a practice owner, this additional debt may prevent you from being approved for a loan. It may also limit your ability to save (see above) for short-term goals like travel or long-term goals like retirement.
An older car will still get you from point A to point B, and renting for a year to two while you navigate the beginning of your career can offer you flexibility when you most likely need it most.
Not Exploring Ownership Opportunities
For veterinarians who have the right entrepreneurial mindset, practice ownership should be a strong consideration for your career. The ability to pay off debt sooner, to make 3x more income than the average associate, and have more control in your day to day life are all strong reasons why practice ownership should be on your radar. (For more information on preparing your finances for practice ownership, please download our FREE Guide!)
Some veterinarians may not desire to be a practice owner, and that’s ok! Perhaps becoming an independent emergency or relief vet is more attractive, or going back to school to be a specialist appeals to you.
There are a lot of ways in veterinary medicine to take control of your career, increase your income potential, and improve your quality of life. If you are happy being an associate in your current practice, that is awesome! But if not and you desire a change, know that you are worthy and your skills and training can be utilized in many ways.
Neglecting Your Physical & Mental Well-Being
Wait, I thought this post was about personal finance? It is! The connection between your health and wealth are intertwined to an extent you may not realize.
I love the quote from The Dalai Lama:
“Man sacrifices his health in order to make money. Then he sacrifices his money to recuperate his health. And then he is so anxious about the future that he does not enjoy the present; the result being that he does not live in the present or the future; he lives as if he is never going to die, and then dies having never really lived.”
Pretty convicting quote. And we are all guilty of this to some extent, which is why it is so important to incorporate both physical and mental well-being into our daily lives. Daily meditation, taking a walk during lunch, and being outside in nature are all ways you can make strides in your well-being journey.
Veterinarians work long, arduous, and irregular hours which makes finding time for yourself all the more important. The AVMA has some great well-being resources, and I also encourage you to visit DVM360 for additional articles on veterinary well-being.
Building and advancing your financial future is a journey, not a race. Take some time to reflect on your current situation, create incremental SMART goals, and don’t hesitate to get help from a professional.
Andrew Langdon is a CERTIFIED FINANCIAL PLANNER™ and the founder of VetWorth, a fiduciary fee-only financial planning firm dedicated to serving the unique needs of veterinarians and their families.
Disclaimer: This article is provided for general information and illustration purposes only. Nothing contained in the material constitutes tax advice, a recommendation for purchase or sale of any security, or investment advisory services. I encourage you to consult a financial planner, accountant, and/or legal counsel for advice specific to your situation. Reproduction of this material is prohibited without written permission from Andrew Langdon, and all rights are reserved. Read the full Disclaimer.