You graduated, now what? What young vets should know about financial planning
My fourth year of vet school flew by and before I knew it, it was time to begin thinking about life as a “real adult.”
Graduation season is not only a time to celebrate our incredible achievements, but also to plan ahead as we enter this wonderful profession. Financial security is a topic that weighs on me heavily and I think about my debt almost daily. As my graduation day approached, I knew it was time to get down to business and start planning my transition from student to doctor.
The COVID-19 pandemic has added stress, uncertainty, and a little bit of chaos to the mix. Looking on the bright side, though, I found myself having a little bit of extra time on my hands to prepare. I’ve dedicated some hours to reading, researching, and consulting with “real adults” about what I should be doing to plan for my financial future. I have learned a lot, so I decided to summarize some key information to share with you. I hope this will help guide new grads who are currently in the planning process or younger vet students who will be thinking about this stuff in a year or two (trust me—time will fly).
First things first, you must have a budget, and nowadays we have so many budgeting tools available (i.e. mobile apps, online calculators, etc.) that there really is no reason not to have one. Ideally, you should’ve had a budget throughout vet school and, let’s face it, most of us don’t. If you do, fantastic. If you don’t, that’s ok, but start now!
Next, establish your financial goals. What are your short-term and long-term goals? This could be things like paying off your student loans in a given amount of time, buying a new car, or owning a veterinary practice someday. Make a list so you can adjust your goals according to your budget.
Then, identify your current monthly income and expenses. If you want to get nerdy, you can further classify your expenses as fixed (i.e. housing, food, vehicle, etc.) and discretionary (i.e. vacation, hobbies, etc.), this will help you make adjustments if you go over budget. Evaluate your budget and ensure your expenses are lower than your income. Consider setting money aside for periodic/seasonal expenses and for an emergency fund (more on that later). Set up automatic transfers into a savings account from every paycheck. If you don’t “see” the money, you won’t spend it.
This is one of the most dreaded words in all of vet med. You’re not alone if you are graduating with significant debt. If you have no student loans—great! One less item for you to worry about when doing your financial planning. For the rest of us, I know this can be a huge source of stress and anxiety. It is tempting to ignore our student loan debt until the last minute, to turn a blind eye towards that scary number, but I actually found that getting organized with my student loans brought me immense relief.
If you’re still a student, consider applying for as many scholarships as you can find. Well-known organizations like the American Veterinary Medical Association (AVMA), Merck Animal Health, and Zoetis offer scholarships every year. Be on the lookout for less widely known opportunities as well, such as the Veterinary Emergency Group (VEG) Scholarship. This very generous scholarship I received covered full tuition plus books for my fourth year of school* and helped alleviate some of my loan burden.
To get started planning your loan repayment, you must first identify the answers to a few questions. What type of loans do you have? What is your total loan debt? (Yes, find out what that scary number is). Who is you loan servicer? Do you have a grace period? Armed with this information, schedule an appointment with a loan counselor, financial advisor, or your loan servicer. I actually met with all three of these and collectively they helped me understand all that loan jargon and pick a repayment plan that worked for me.
3. Credit Card Debt
There are some crazy statistics out there about the average American’s credit card debt. I know I’ve had my fair share and most of us will graduate with some. Interest rates on credit cards are insanely high compared to the interest rate on your student loans. Thus, try to lower or pay off your credit cards as soon as you can. What you owe on your credit cards also impacts your credit score significantly (about 30 percent I found out). It is better for your credit score to have more credit available and use less of it, than to have only a few credit cards that are maxed out. Having a good credit score is important for future borrowing once the time comes to buy a house, veterinary practice, etc. There are many tools available to find your credit (FICO) score and I recommend monitoring it closely.
4. Emergency Fund
Most of us don’t have one yet and it is such an important part of financial planning. It is recommended to save three to six months of expenses, or the equivalent of at least three months of your salary into an emergency fund. This will allow you to more easily weather unexpected events such as accidents, health emergencies, unemployment, or other crises. Ideally, these funds should be kept in an account that is easily accessible to avoid penalties when you need access to your funds.
Make sure you have health insurance. A lot of us carry student insurance that expires at/around graduation time. There will be a lag period from the time you graduate to the time you start your new job and you want to be covered during this time. Additionally, sometimes when you’re covered through your employer there will be a clause that states your coverage begins 30 or 60 days after your start date. Be informed about these caveats so you can plan accordingly. There are temporary plans you can buy to cover this lag period and some student health plans have the option to extend coverage for a few months. Considering everything happening in the world, having active health insurance is a must.
Professional liability insurance is another must-have. A lot of employers will cover this for you, but you can also shop around with the help of your financial advisor. AVMA PLIT is commonly used to cover liability and many of us are familiar with this option since we had this as students.
Disability insurance will cover your income if you become disabled and can’t work for a period of time or for the rest of your life. No one wants to think of this, but truth is, it can happen. It’s a good thing to have if you want some peace of mind because if you become disabled, guess what? You still owe those student loans.
The insurance policies mentioned above are the basic ones that were recommended to me and I decided to carry. Other insurance options worth looking into are life insurance and homeowner’s/renter’s insurance.
6. Planning Ahead
Organizing my finances helped me feel more empowered and significantly decreased the anxiety surrounding my transition from student to doctor. With the help of my financial advisors at Total Planning Veterinary Services (who offer free financial advice to veterinary students) and using many online tools available at no cost, I was able to come up with a strategy that works for me. Everyone’s approach to financial planning will be different and I hope this helps some of you get started or add to your ongoing plan. Good luck and congrats on your achievements!
* For information about the VEG Scholarship, visit www.veg.vet/scholarship. Deadline to apply is June 1st, 2020
The views expressed in this article are solely mine and do not necessarily reflect the views of my employer, Veterinary Emergency Group, or the views of other institutions mentioned in this article.