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.
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.
Image: Wilipedia Commons