Sunday, June 18, 2017
One Year in the Black
It has been just over one year since I reached a net worth of zero. After being in debt for almost ten years, it has been a welcome change to open the Excel file in which I track everything financial and see that my investments finally exceed the balance on my line of credit.
As a medical student and resident, I hadn't thought much about finances. I was surrounded by people who came from wealthy families, and it didn't take me long to adopt their spendy habits and to accumulate a lot of debt. I reassured myself that "everyone was doing it" and that the debt was okay, because it would be easily repayed once I became a physician and started getting paid in bags full of money. I rarely looked at the balance of my line of credit, and whenever I did it was just a quick glance, followed by a nervous chuckle at the ridiculousness of owing the bank such an enormous sum.
It wasn't until my last year of fellowship that I actually woke up to the reality of how much money I owed and started doing something about it. I went on a budget, and I actually started spending less than I was earning for the first time in eight years. I didn't save a lot of money in that year, as it was a major adjustment just to start living within my means, but at the very least I laid some groundwork for financial responsibility as an attending.
And then I finished training! And got an adult job! And suddenly there was a lot of extra money to put towards savings and debt repayment. Every day that I worked, I got a little bit closer to the longed for balance of zero. And yet, my anxiety about money actually got worse. When my line of credit was ridiculously big, I comforted myself by saying that I could declare bankruptcy if I ever lost my job*, because there was no way I could pay it back on anything other than a physician's salary. As it got smaller, and my investments bigger, I suddenly entered territory where I would be expected to pay back my loans, regardless of whether I could continue to work as a physician. And the idea of earning a non-physicians salary but still being $50,000 or $60,000 in debt was terrifying.
Thankfully, I have kept my job, and after ten months of working and saving I got myself back into the black. I expected that the anxiety about money would resolve instantaneously after achieving that milestone, but oddly enough I didn't take a lot of comfort in being a 39-year old with a net worth of zero. I still felt vulnerable to the possibility of becoming disabled** or burning out of my career and not having enough money to have good options. So I kept saving and repaying debt and watching my net worth get healthier and healthier.
In the past year, I've increased my net worth by enough that I could live at my current standard of living for about three years. While I hesitate to share actual numbers here, I will say that my net work growth breaks down roughly as follows: 10% from growth on investments; 10% line of credit repayment; 30% cash savings (for a down payment on our first home); and 50% long-term savings (RRSPs and a TFSA to minimize taxes).
My savings vary a lot from month to month, due to a fluctuating call schedule and taking time off work for vacations and conferences, but the overall trajectory of my net worth has been pleasantly positive. And finally...FINALLY...I am starting to relax a little. It is comforting to know that I could become disabled and live comfortably off my disability insurance payments. Or I could burn out from medicine and pursue a different career, and I would be absolutely fine. For the first time in a decade, I feel like I have some real security and real options. I'm still a long way from financial independence, but at least I'm sleeping more peacefully at night.
*I only had private student loans, so I think they would have been cancelled out by a bankruptcy. But don't quote me on that. And don't be an idiot like me and think that bankruptcy is a good financial strategy!
**Yes, I have disability insurance. As should every physician.