Dear Dave,
I went to medical school, and now I have $70,000 in debt. I just started a three-year residency making about $50,000 a year, while my wife makes $40,000. The student loans represent our only debt. Do you think we should be paying this off or investing in a Roth IRA?
-David
Dear David,
If I were in your shoes, I’d work on paying down the student loans. That means you may never be in a Roth, but there are other things you can invest in and grow wealth.
I realize this may not seem right mathematically, but I don’t always make financial decisions based exclusively on math. Many times I do things based on changing money behaviors—stuff like paying off debts from smallest to largest because it actually works. Personal finance is 80% behavior, and only 20% head knowledge. So sometimes you have to go with what actually works best overall, in spite of what the technical math shows.
In your case, I think it’s going to be very valuable to have no student loans by the time you complete your residency. With three years to go, and living on a $90,000 a year income, you can do it. Then, when you come through the other side as a full-fledge doctor, you’ll have the great income and be sitting there debt-free. Not a bad place to be, right?
I understand the Roth seems like a pretty good idea right now, but my advice is to stick with becoming debt-free as quickly as possible. Once that’s done, you and your wife will be able to invest, save, and build wealth like crazy!
-Dave
