Are you carrying any balances on credit cards?
Do you have any practice debt? Is your X-ray system and other equipment paid for? Do you owe any back taxes? How much do you owe on cars, trucks, boats, and other toys? How much do you owe on your home? How much interest on debt are you paying every month compared to how much interest you earn?
DCs tend to avoid thinking about these numbers, because they don’t like the feeling that debt brings. Worse, by ignoring these questions, DCs commonly make even more money mistakes.
You might be impressed by a fellow doc who has a practice loan, student loans, a big X-ray payment, a Jet Ski, a sports car, and a powerboat. You might think he is living the “big life” as a chiropractor. But even if he looks and acts rich, chances are he’s actually broke. Large debt and interest payments can kill your practice and ruin your entire financial future.
A typical tale
Let’s look closer at this “rich” chiropractor. His student loans were $128,000. He had been paying over $1,000 per month for nine years. That came to over $100,000 paid in. But how much did he still owe? The payments were automated and he never thought about them.
Eventually, he got online and went to the student loan website for the first time to view his account only to discover that he still owed $123,000. After paying in over $100K, his principle had only dropped $5000. He was understandably furious.
Ultimately, he had only himself to blame. He realized then it was his responsibility to become a money-handling master. (Disclosure: This chiropractor was me.)
The late psychologist Nathaniel Branden once said, “No one is coming.” It was a warning that no one else is responsible for the health of your practice; only you can succeed.
Today, most DCs have student loans at, or over, $200,000. X-ray machines that used to cost $20,000 are now $50,000. That $20,000 car is now $35,000, and so on. This is why after years of generous service, few DCs end up wealthy. Experience suggests that only about 5 percent of DCs have (or will have) real prosperity.
Consider how things were in the past: Chiropractic college used to cost $325 per term—an amount you could pay with cash saved from a summer job. Student loans and credit cards were rare. If you didn’t have the money for something, you usually didn’t buy it.
Today, chiropractic college can cost $11,000 a term. Huge loans are required with no guarantee a student will be able to pay them off. Equipment costs twice as much (and is usually financed), and credit cards are the norm.
The path to freedom
If you’re in this situation, you probably want to fix it. There are many ideas on how to pay off debt. There are television shows, websites, and pundits trying to teach a debt elimination message. You hear words like “emergency fund” and “debt snowball” and other intriguing terms that won’t work for healthcare professionals like chiropractors. These folks mean well but they mainly teach you to pay extra on debt at the end of each month.
This sounds good in theory, but it’s impossible from a real-life standpoint because there is no extra money at the end of the month.
If you want to change your financial life, memorize the next three words: small amounts weekly. And commit to these three words, too: small amounts daily.
You can completely change your financial future by making payments in small amounts daily and small amounts weekly. Of course, these apply to investing as well, but that’s another story.
Making the effort
The debt reduction system I used was almost an accident. I took a business card and on the back wrote these words: “Pay some today.” I put it on my keyboard where it would be in front of my face. I tried to make a student loan payment every day, sometimes even two or three—$20 here, $50 there, etc. This enabled me to pay off my student loan debt in less than nine months. I also sold the Jet Ski, and have only one credit card with a zero balance that sits in a dusty drawer.
Every person, including you, has a little fluff money every day that can be shaved off the top. By using this to make lots of small payments you can eat into the principle of any loan faster, building an impressive momentum.
Banks want you to make monthly payments so they can get all the interest for the entire month. This is a trick. Instead send frequent payments to eat away at accruing interest and take bites out of the principle to lower the amount as fast as possible. Student loans, home mortgages, car loans, and other loans all have interest that accrues differently. There is a strategy for each of them.
A rapid-fire debt elimination system
Of course your situation and plan should be tailored for your needs, but the following can serve as a starting point. Some might only be able to start by paying off $5 a day. Others may be able to start with $100 a day. Regardless, get a system in place.
- Line up all your debts from smallest to largest. Ignore interest
- Automate all monthly payments for the current amount due each
- Take the smallest debt and arrange another small automated weekly payment toward
- Then go in every day and make a payment of any amount
- As one debt is paid off, target the next one with the same
- Close all credit accounts until you just have one card with a zero
- If you are torn between two debts, pay the one with the larger monthly
- Make car payments automated weekly. If the payment is $450 a month, pay $150 a week.
- Leave equipment leases as-is. These normally cannot be paid
- Focus on patients and production. Collecting more makes this much easier!
As you become a better steward with money, more money will come to you. Once the burden of debt has been eased, you can apply more of yourself toward being a great chiropractor and helping as many people as possible.
Tory Robson, DC, DAAMLP, is the author of The Image Doctor and the 7 Pillar System for Professional Success. He is also the founder of Winners Edge Chiropractic Consulting and committed to helping DCs build smart, efficient, credible, and successful practices. He can be reached at email@example.com or through truechirosuccess.com.