As I document my financial journey here, I also try to keep up reading for myself, staying current with what other folks in the space have to say. I’ve shared my thoughts on a few books specifically dealing with the subject of physician personal finance, and today is another such entry.
Today’s book is The Doctors Guide to Eliminating Debt by Dr. Cory Fawcett, who writes over at Financial Success MD. This is book 2 in his ‘Doctors Guide’ series; I’ve previously written about the first in the series, The Doctors Guide to Starting Your Practice Right. Unlike the first book, which was perhaps somewhat less applicable to me as someone who has already started in an employed position, this volume was clearly right up my alley. After all, what could possibly be better fit given the name of my blog?
I put this book in the category of ‘inspirational’ resources, where the focus is more on changing mindset and making the decision to get out of debt than it is on the nitty-gritty details. It is really meant to be a wakeup call for the physician who has been ignoring their debt, either through fear or lack of awareness. The book guides the reader gently from discussion of the root causes of excessive debt, to the steps to take to plan a recovery, to strategies for staying out of debt and building wealth.
One of my favorite metaphors comes in Chapter 2 (“Balance”), with a discussion of achieving equilibrium on the path to wiping out debt. Dr. Fawcett likens the three major components of outbound cashflow — debt, spending/lifestyle, and saving/investing — to allocating money toward one’s past, present, and future, respectively. This is a really elegant way of thinking about it, and he emphasizes that you don’t want any of the three taking up too much of your financial bandwidth. This is something that every young (and maybe not so young!) doc can empathize with: having myriad places to put money and struggling to divvy it out.
Chapter 3 (“Symptoms and Causes of Debt Accumulation”) focuses on the etiology of excessive debt, and it hits on what I think is one of the most pervasive and damaging myths in all of personal finance: your primary residence is not an investment! As Dr. Fawcett points out and as I will tell anyone who will listen, the purchase and upkeep of a house is rife with unrecoverable costs that don’t apply to someone who is renting. Furthermore, a large mortgage will be an albatross around the neck of someone who is trying to retire, as it will eat up a good portion of one’s nest egg. None of this is to say that buying a house is the wrong choice, but it should be correctly viewed as a (maybe very worthwhile!) lifestyle expense and not a savvy investing play that’s a sure thing to increase one’s net worth.
The more concrete steps for getting out of debt start in Chapter 6 (“From Decision to Debt-Free in Four Easy Steps”). This essentially involves calculating net worth, deciding on financial goals, making a written budget, and finally paying off debts one by one. Dr. Fawcett recommends the snowball method (paying off the smallest balance debt first), while I am more partial to the avalanche method (paying off the highest interest debts first), but given how much psychology goes into personal finance, this isn’t something I’m dogmatic about. It’s like the old saying that the best camera is the one you have with you — the best debt payoff strategy is the one you can actually stick to, regardless of what the raw math says. He also brings up some useful cognitive strategies like thinking of potential purchases in terms of hours worked, which is a technique I’ve used since long before I was a doctor.
Chapter 9 (“The Finish Line”) ends the book with a reflection on the importance of retiring *too* something and not *from* something. Each of us should have in our mind a picture of what we will do when we have ‘enough’, and given our skill-sets and potential value to humanity, it probably shouldn’t involve wasting away on a beach or playing video games (at least not in its entirety). Once we are free of the need to earn a living, Dr. Fawcett challenges us to find an internal purpose that we can manifest into the world, something that provides value both to ourselves and those around us.
In sum, I think this would be a great first book for any young or mid-career attending who feels overwhelmed by their debt but is afraid to tackle the problem (or doesn’t even know that it can be tackled). It’s so easy to get trapped in our own little world and perspective, and this might be just thing to knock that person out of their rut.