Every year medical students take on humongous exorbitant amounts of debt. They are promised the illusion that once they are done with their training, they will easily earn enough money to pay back their loans and then some. Hopefully that’s true, but I have a feeling that that is less and less the case anymore.
When I graduated from medical school, I had nearly a quarter of a million dollars to pay back. All of it was from medical school. At that point, I was beginning the phase of internship and residency. That’s where new doctors work ludicrous hours and are barely paid enough to survive.
Most of the time, most doctors are forced to apply for deferment during this time. This means they don’t have to pay back their loans during this time. The drawback is that the interest on the amount they owe continues to grow. It is often suggested that one should pay what they can. That’s great advice and hopefully the circumstances are right where one has some money left over at the end of the month to repay their loans. Although it makes a difference, it’s a drop in the bucket in the end.
Upon graduation of post graduate training is when things get real. After nearly a decade of sacrificing time, relationships, income, and often being treated lower than dirt, comes the bill. How much a doctor earns may seem like a lot, but many doctors easily owe $2,000 or more each month for decades to pay back their loans. This may not be a big deal to a small group of doctors. The rest often feel trapped. Even if they like what they do, it’s easy to feel like a slave.
Doctors carry their loans forever. Claiming bankruptcy is not an option. Medical school loan payments cannot be deducted from taxes. For outsiders, it’s easy to say that doctors know what they’re getting into or that they run into financial trouble because they are buying expensive yachts, cars, and mansions. Unfortunately that’s not true. Doctors are having trouble leading middle class lives and no one feels sorry for them because they think doctors overcharge and are overpaid.
If I could go back and do it all again knowing what I know now, I would have certainly done things differently. Most doctors know little about finances and assets. It’s easy to put it off thinking that those days are far off. The sooner one learns about these things, the better. When I used to hear about assets, owning a home or a car would come to mind.
Unfortunately, the car I had was not worth much. Owning a home was unlikely. Owning a home can be a great asset, but only if the price of a home goes up. Furthermore, there’s a lot of expenses in it. There’s no guarantee that the price will raise in value when one looks to sell. Finally, neither owning a car or a home are not a constant source of cash flow. What this means is that unless you rent or get paid for driving others around, you do not get paid regularly for owning your home or car.
That’s what you really want is assets that cash flow. That means assets that bring you a constant source of income while you own them. As a medical student or doctor who does not likely have a lot of free time, the more passive the income, the better. Passive income is income that comes in with little or no effort. It’s like an online course. Once the work of putting it together is done, it can bring in revenue month after month if it is in demand with little or no work.
Commercial real estate can be a great asset that can bring in a monthly source of income. However, everything has to be done right. It requires a lot of work up front and a good team. Done correctly, it can be a great source of passive income. Done incorrectly, it can be another source of massive debt. The drawback is that I would have never had the knowledge, time, and resources to acquire a great cash flowing property.
There’s two things I would have done. Both are long term strategies but they would have provided protection and allowed me to grow some assets that would have helped me pay off my medical school debt much sooner. Here they are:
Bank on Yourself / Cash Flow Banking Policies
These are very specific types of whole life insurances that have performed well through all the depressions, including the Great Depression. These are stable, time-tested plans. Before you go think it’s some kind of scam, these policies were at one time the bedrock of savings plans. Walt Disney borrowed money from his policy when no one else would to fund Disneyland. JC Penney borrowed from policies to make payroll.
Before you stop reading because you consider me an idiot, let me explain. The right kind of life insurance can be an asset. The wrong kind, like term insurance, can be a liability. I will explain why the right plan such as Bank on Yourself or Cash Flow Banking policies can be such a great asset to own.
Set up correctly, these plans can act as a retirement account without restrictions, a super-charged savings account, and source of loans. You can store your money in these plans while they consistently grow faster than stock market investments. You can borrow money from your policies as their cash value grown. As a bonus, your family is insured if something were to happen to you. Instead of leaving them with your debt, you can sleep better at night knowing they are covered.
These policies have flexibility on how they can be structured. With that in mind, it would be a good idea to talk to an advisor and let them know your goals so that together you can come up with a plan.
These policies are not get rich quick schemes. It generally can take 3 years or longer to build up a strong cash value in the policy. They are great and have many advantages, there are drawbacks. If you cannot make your payments, then you can lose your policy. Therefore, the best thing to do is to set it up where you make a payment each month that you know you can make. You can always add more money into your policy when you can to have it grow faster or open multiple policies, but make sure that you set them up with a payment you can make.
These policies can be set up as retirement accounts where you can pay into them until a particular age, and then, you predictably get a monthly check for the rest of your life. That way, you can rest assured that you won’t run out of money in your retirement account. As a doctor, most start late in saving for retirement and most plans like 401k and IRA’s, are dependent on the stock market. The beauty of these plans is that as they grow in cash value, you can borrow from the cash value penalty free and they are not tied to the performance of the stock market.
It’s always possible to have multiple policies, but always make sure that you can pay them. I recommend visiting Bank on Yourself or Cash Flow Banking and speak with an advisor. Make sure you let them know your goals. Also make sure that you understand as much of your policy as you can. Don’t pay, what I have heard called the “stupidity tax.” That’s where you lose money because of investing in things that you have no real knowledge about.
If you want to learn more, I recommend reading Garrett Gunderson’s book, Killing Sacred Cows, or Pamella Yellen’s book, The Bank on Yourself Revolution. They go into far more details on how and why these plans are far superior to 401k’s and IRA’s and why you should consider using them.
Ideally, I would have opened at least one policy prior to or early in medical school. It certainly would have helped me when I was unable to get any kind of loan from a bank after graduating residency. I didn’t open up my first policy until a few years into private practice. There’s no harm in that either, but the sooner one starts, the better. Especially if you want to use it to help with medical school loans since these are long term strategies. You could even use these policies to help fund my next favorite strategy, Gold and Silver For Life.
Gold and Silver For Life
As I was learning about investing, I heard that gold and silver should be a part of one’s portfolio to protect against the crash of the dollar. Many economists have suggested that from history, the dollar is at the end of its life cycle and having gold and silver protects against that. The problem is that owning physical gold or silver is not a great investment. First, for you or I to buy gold and silver, we’ll never get it close to market value. That means that any gold or silver you or I would buy, would be significantly marked up.
That means that if they add 30% to the market price and that’s the price that I bought an ounce of gold for, then gold has to go up 30% in value just to break even before I sell it. The second and more important reason to me that gold and silver are not great investments is that one cannot “cash flow” gold or silver. That means that owning gold or silver does not generate a steady income for you. The only way to get any income from gold or silver would be to sell it.
So gold and silver did not seem like great strategies to me. That is until I learned about the Gold and Silver For Life program. The idea that I could buy gold or silver below market value and earn an income on a monthly basis from it regardless to what happens to the price of gold or silver, was appealing to me. I was quite skeptical, but I saw the value in it if it truly was legitimate.
I ended up liking this strategy a lot. As I went through the training, it turned out to be quite brilliant, but simple. As long as you follow the rules, you can on average earn 1-2% per month. That comes out to 12-24% per year, which is really quite remarkable. One of the reasons I really liked it and think that it would be good for medical students and doctors is that it doesn’t require a lot of time. Unlike real estate or stocks, this strategy requires a small time investment each month.
In general it requires about 30 minutes a month to earn 1-2% on average on your investments. Going through the program can be quick and although it felt a little bit overwhelming at times, the concepts were easy to grasp. One can always practice with virtual trading until they feel comfortable following the rules. There are weekly coaching calls included where people get answers to their questions. Overall, I felt good knowing that I was protected if there was a collapse of the dollar with this strategy and it gave me a way to own gold and silver and earn a monthly cash flow from it. That money can be constantly added back into the program to compound and grow the investment.
This can be a great long term strategy that could turn some of the medical school loan money and grow it faster than the interest on your loans. Therefore in the long run, allowing the money invested to compound may also grow into a sizable amount that one could use to pay off their student debt or just grow as a way to have an asset that cash flows to help offset monthly costs as it grows. To learn more, I recommend watching one of their upcoming webinars.
As always, I recommend doing your homework. What works for some, may not work for others. I like the strategies above for the reason that they are simple, don’t require much time to learn or implement, and grow predictably. If I could go back, I would have tried to implement at least on of these strategies or both. One could use the cash value from their Bank on Yourself or Cash Flow Banking policies and borrow it as it grows into the Gold and Silver For Life strategy. That way, one’s investment can really begin to take off. I can’t go back and implement these strategies but if I could, that’s what I would have done. It can be easy for medical students and doctors to not pay attention to finances but with the right pieces in place and a good strategy, the future can be bright.