The Debt Shrink’s Story

Internship was a Tough Year

I just moved to a new state for internship. My husband left his job to move with me. When we arrived I found out that I was pregnant (panic!). After 5 years of graduate school, would I be able to graduate? How would I pay the medical bills? We had no family nearby – who would help with the baby?

During the first week of internship, I disclosed I was pregnant. A supervisor asked how long I planned to be out. I guessed around two weeks. I was obviously clueless! What did I know about having a baby?

There were complications. One week into my second internship rotation, I was hospitalized. My baby was premature and spent weeks in the NICU. I had to take off second rotation (with the exception of didactics) and basically live at the hospital, going home only to sleep.

Baby

The week I had the baby, my husband had just (finally!) landed a job after five months of searching. My training program was amazing. They worked with my schedule so that I could leave by 3:30 so that my husband could get to work by 4:00. With opposite schedules we didn’t have to pay for childcare, but to say we were exhausted would be a gross understatement.

Having a baby on internship posed a few problems. First, the facility where I was interning wanted to cancel my insurance starting on the day I went into the hospital. Fortunately, I negotiated with them to cancel my insurance at the end of the month I stopped working (after my baby was released from the NICU) and I went without that insurance for the next few months while on maternity leave.

Second, my graduate program withdrew me the semester I went on maternity leave. So now my student loan servicer wanted me to begin repaying my loans! After weeks of negotiating with the loan provider and documenting that I had been attending my didactics while on maternity leave, that finally got worked out.

Third, there was the lack of income plus mounting bills. In the span of a year, my husband had been out of work five months and I was without pay for six months (2 between grad school and internship plus 4 for maternity leave). While maternity care was covered 100% by insurance, NICU bills were not. The medical bills were in the thousands. My husband cashed out his 401k (stupid move!) to try to keep us a float.

Post-doc

After graduating, I accepted a 2-year post-doc position near family. My baby had separation anxiety, and since we didn’t know where we’d be in another 2 years, we decided it’d be best for my husband to stay at home with him.

We were down to one salary and had a baby. Student loans would be due soon, on top of the medical bills and car loan. We had no retirement. We owed taxes for cashing out the 401k (stupid!). Nothing for my kid’s education. Nothing for a house down payment.

I knew what needed to be done, but had no plan how to do it all.

My Personal Finance Preceptors

I turned to the internet for guidance and inspiration. I fell in love with Mr. Money Mustache and his badassity (it’s okay, my husband has a man-crush on him, too); he motivated me to avoid Fancy-Pants living and punch the debt in the face! Trent Hamm at The Simple Dollar provided ideas on simple things one can do to save money. Then there’s Jacob at Early Retirement Extreme, J.D. Roth at Get Rich Slowly, and Joe at Retire by 40. From each of these bloggers, I received tips to reduce my monthly expenses and motivation to become financially independent. But I still didn’t know how to prioritize.

I heard about Dave Ramsey and asked for his book The Total Money Makeover for Christmas (thanks Mom!). What was life-changing for me about this book was the Baby Steps, which gave a specific order in which to tackle my debt. After doing the math, it was clear he was right. How had I not thought of this before? By trying to do everything, I did not make progress on anything. Laser focus on one thing at a time was key.

The Plan

By avoiding lifestyle inflation and keeping my expenses at near-grad-school level, creating a budget, and following Dave Ramsey’s baby steps sequentially, within three years of graduating I paid off my debt, and five months after that I put a down payment on a home.

Present Day

Fast forward to today. I am a licensed clinical psychologist and my husband is still a stay-at-home dad to our now 3 children. I contribute up to the point of the match in my employer-sponsored retirement plan and up to the max in a Roth IRA. Lifestyle inflation has been kept to a minimum and every extra cent is put toward the principle of our mortgage. As the sole earner for my family, it’s important to know that if I become unable to work my children will still have a roof over their heads. Once my mortgage is paid off, I plan to also max out my employer sponsored plan.

I LOVE MY JOB, supervisors, colleagues, trainees, and patients. I plan to work here until I retire. And I hope to come in each day because I choose to, not because of shackling debt or golden handcuffs.

2 thoughts on “The Debt Shrink’s Story”

  1. We’d read a number of personal finance books over the years, but The Total Money Makeover gave us the action steps to take as well. Hopefully you are also funding a spousal IRA for your husband, too. My husband is disabled, so even though he can’t work, as long as I’m working, I can fund IRAs for both of us.

    1. Good point. Yes, I do have an IRA for my husband. It’s sad that, as far as I know, that’s the only way to save for retirement for someone who does not work outside the home.

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