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What Can Doctors Do When Consumer Debt Is Inevitable?

My advice for you all is clear. Avoid consumer debt like a disease. Because it is. If you can’t buy it in cash, you can’t afford it. That is my mantra and I want it to be yours.

Of course, remember that there is a difference between good and bad debt for doctors. But consumer debt is bad debt. Hands down. Point stop. No argument.

However, there are times in the path to becoming a doctor when taking on some form of consumer debt is inevitable

Let me give you two examples:

  1. When I was in training, I needed to pay licensing and exam fees for various things. These often cost in the $1000s. I did not have this in my savings so I paid with a credit card. That means that my interest on that debt was >20%! That’s just ridiculous.
  2. As a trainee, I also had poor financial habits (this is well documented) and went into credit card debt by purchasing a lot of very not essential consumer items that I could not afford with a credit card. Even more debt with a 20%+ interest rate.

Even once I started my financial education and knew I needed to get rid of this debt, I could only do so by slowly paying it off.

It would have been nice if there was an alternative option to help me (and other doctors) in these situation.

Well, the good news is that there now is an alternative option

To help me tell this story, I’ve asked Tim Flanagan MD to help me out. Tim is an anesthesiologist and is married to an OB/GYN. He also founded Doc2Doc Lending.

doc2doc lending consumer debt
Here’s Tim!

I’m going to let Tim take it from here…although I’ll intersperse my thought in italics.

Trigger warning

We will address He-Who-Must-Not-Be-Named – not Slytherin’s worst disciple, Lord Voldemort – but rather the ubiquitous scourge of medical training, credit card debt. 

We will also briefly cover old pipes’ worst nightmare – the power snake. 

Both tied together tightly with the stress of beginning an intern year and the stigma of credit card debt. 

My wife signed her first attending employment offer after I matched for anesthesiology residency in March 2018. Every physician financial blog (like mine!) encourages you to avoid credit card debt, and we did.

We saved, we invested. We lived it a comfortable apartment. But nothing lavish. We ate out sparingly.

Unfortunately, that did not prevent us from racking up some significant credit card debt in what I think is a pretty common transition period for most medical professionals

My wife waited to sign an employment contract in her 4th year of OB-GYN residency until we knew where I matched, which as I’m sure this audience is aware, is in March.

My wife submitted her license and credentialling information together and then the waiting game began. 

  • From the submission date for credentialing and licensure submission until her first attending paycheck was 220 days!
  • From Match Day to intern paycheck was 122 days!


Then we had to figure out our home

Using a physician home loan, we bought our first house with money I had saved from my “1st career.”

I wanted to make sure we had plenty of cash on hand for what I assumed would be inevitable issues. We had the cash available to pay for some of these expenses, but sometimes it makes sense to borrow and that’s what we did.

It was a period of all expenses, no income. We racked up balances on normal stuff, but also on some big on time expenses that we knew would eventually be reimbursed by my wife’s employer. 

(I think that this can make sense in select scenarios. But I would only spend on credit what I knew I could pay back immediately once my paychecks started coming in. That’s what Selenid and I did when we bought our home and were in this time period before my first attending paycheck.)

We were doing a pretty good job on the consumer debt credit card balance pay down

This is…until an overzealous plumber using a power-snake (exhibit A) put a hole in the pipe that drains the kitchen sink into the basement plumbing that washes out to the sewer.

Please see the picture of my poor old pipe (exhibit B), the water from the kitchen sink made a fun noise hitting the floor in the basement.

We had to get a portion of wall cut-away, and I had trouble finding a plumber who could tackle the job.

So, I was on surgery nights. I was doing all this house stuff when I should have been sleeping. Finally, we paid a bunch of money and got the plumbing and wall all squared away, but we were in a little rut with the credit cards after spending down some of our emergency cash reserve on the home repairs. 

Exhibit A and Exhibit B

Because this debt was on a credit card, our interest rate was super high. And it just didn’t make sense to me that two doctors with good creditworthiness should have to pay such a high rate on these hard-to-avoid costs.

The answer was to refinance this consumer debt using a personal loan

I have to admit, it felt counterintuitive to take out more money at first.

In this time period, before I knew about Doc2Doc Lending, I took these steps:

  • Took out a loan from another financial institution for a much lower interest rate than my credit card
  • Used this loan to pay off my consumer debt
  • Aggressively paid off this consumer loan

(I just want to lay out very clearly what Tim and his wife did here. Because it’s important to understand. They had credit card debt that they accrued – right or wrong, that was the reality. So instead of paying 20%+ interest rate, they took out a personal loan to pay off the consumer debt. And this personal loan had a much lower interest rate. That is smart. That is interest arbitrage. But the most important part os that they still aggressively paid off this loan!)

Our credit scores were good throughout the period. But they went up significantly when we paid down the credit card debt. When we were paying down our loan, it also forced us to be more thoughtful about all our month to month expenses. We also respected that we needed to have a more reasonable buffer for things that are out of our control – looking at you power snake. 

Now I do this to help others

My hope is that after you’ve read all this you understand that personal loans aren’t out to get you, they can really help you get back on track.

(Yes – they can help you get back on track, when used responsibly. Like everything, that is the key.)

If you’re taking out a personal loan for a credit card debt, you need a good month to month budget to make sure you don’t reaccumulate debt.

(If you need help making a budget, use my free template here.)

Finallly, as a physician you’re part of a community of folks who really want to help you help yourself.

I helped found Doc2Doc Lending to help physicians who were in a situation like mine, especially after I realized how common it is in talking with my colleagues.

Now, we offer personal loans and refinance packages to physicians to make sure that they don’t have to take out or be stuck with massively bloated consumer debt like Jordan and I were.

I have loved reading Jordan’s content. I find it extremely useful and empowering for me.

Our goal is to be another tool that doctors can use in their journey to financial freedom!

My 2 cents

Thanks for sharing your story Tim!

This is Jordan again now. I just want to finish up by emphasizing a theme that come sup a lot in this blog.

Debt is a tool. And it can be used to help or hurt you.

When I was in training, having an option for a low interest rate personal loan for license and exam expenses would have been far superior to putting it on a credit card. I also wish I knew about these options so I could refinance my credit card debt into a lower interest rate.

In those situations, a personal loan like this is very helpful and productive to your financial success. That’s why I bring it to your attention here!

But, on the converse, in my current situation, it makes little sense to take out a personal loan. I have a sufficient emergency fund and savings rate to cover any necessary expenses. And taking out debt for unnecessary expenses would not be a smart move.

So evaluate your situation. If this is something that could help you, check it out here.

And if you are looking to help pay off your student debt, check out the strategy I am using here!

What do you think? Did you have to rack up consumer debt in training or during the transition to an attending? How did you manage that? Let me know in the comments below!

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    Jordan Frey MD, a plastic surgeon in Buffalo, NY, is one of the fastest-growing physician finance bloggers in the world. See how he went from financially clueless to increasing his net worth by $1M in 1 year and how you can do the same! Feel free to send Jordan a message at [email protected].

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