AVMA Webinar Review- Refresher On Adulting: Personal Finances

I recently attended a webinar hosted by the AVMA. With a title like “Refresher on Adulting: Personal Finances,” how could I not jump at the chance?

(By the way, that was not meant to be said with a hint of sarcasm. I really, truly jumped at the chance to see what this webinar was all about. I proudly embrace the fact that this topic excites me.)

So here’s a quick rundown for those that were unable to view the webinar or simply want to get the highlights. This talk was presented by Dr. Bridgette Bain and Dr. Caroline Cantner of the AVMA.

MANAGING DEBT

First things first, you have to know how much debt you have. Then you need to plan for how you’re going to pay it back. Sounds so obvious, but if you’re juggling multiple loans, it can be difficult to keep track of this information. The NSLDS (National Student Loan Data System) is a useful tool for those that want to track their federal loans in a centralized location. Remember that you will need to keep track of your private loans separately.

The presenters briefly discussed the difference between standard repayments and income driven repayments. You can see my brief overview of the different payment options here. There was one great slide that showed the power of increasing your monthly payments. Here is the text version of what was on that slide:

$150,000 in student loan debt at a 6.7% interest rate

Pay off in 25 years: Monthly payment of $1,032, total payments of $309,491

Pay off in 8 years: Monthly payment of $2,032, total payments of $193,910

Pay off in 5 years: Monthly payment of $3,032, total payments of $176,043

If you choose the last option, that means you save a total of $133,448 and have this paid off 20 years ahead of schedule.

My thoughts: Obviously, not everyone can nearly triple their student loan payments just because they want to. There are also opportunity costs associated with the money that could have been spent investing rather than paying down debt.

But I bet many can figure out ways to increase your payments, whether you cut back on expenses or increase your income. Remember, you can also put in any bonuses and salary increases in paying off these loans faster. Finally, don’t forget about refinancing options if you are not looking to be in a forgiveness plan.

The next slide explained that a 2018 graduate with $200k in debt could expect to spend 30-50% of net take-home pay on a salary of $75k, depending on going with a 10 year or a 25 year standard payment plan.

My thoughts: Can you imagine having to pay 30-50% of your take-home pay towards student loans for 10-25 years?? Unlike housing costs, which can take up a similar percentage of your take-home pay, you are not paying into an asset. YOU are the asset, and it’s your job to figure out how to use your human capital to pay that back.

The student loan repayment world has gotten much more complicated since I graduated 15 years ago. For current students, educate yourselves in order to minimize the amount you’re borrowing. For those still paying their loans back, find the best strategy. You could very well be in a suboptimal plan and not even know about it.

INCOME

The AVMA has a tool called a Salary Estimator. (As an aside, this is accessed through a newly launched website called My Veterinary Life. This is a nice resource for general wellness within the veterinary profession). You can quickly enter data in order to estimate what your salary would be under various scenarios. So far, the data is only good for veterinarians with 1-6 years of work experience. Hopefully, the AVMA can gather more data to include those that have been in the workforce for greater than 6 years.

All you need to do is answer 8 questions, and you will immediately see a salary range from the 25th to the 75th percentile. For example, I went through the salary estimator and entered the following information:

1. Hours worked per week: 40 hours

2. Work experience: 3-4 years

3. Location: New York state

4. Practice type: Companion animal medicine

5. Education: no to master’s or doctorate degree

6. Residency: no

7. Board certified: no

8. Practice ownership: no

The median salary came out to $77,668. When changing my answer for practice ownership from “no” to “yes”, the median went up to $84,610. You can change any of the variables to see how that will change the final salary estimate.

My thoughts: This would be a great starting point when looking for employment. It would also be very eye-opening for those that are thinking of pursuing different types of practice within the profession (public versus private), as well as those considering additional degrees, training, and practice ownership.

There was a disclaimer to not use these numbers as a way to negotiate what you “should” be earning. These numbers are simply gathered from existing data and are meant to be used as a general guideline. Veterinary students get their own version of the salary estimator.

To be completely honest, I had no idea what veterinarians made when I made the choice to apply to vet school. I didn’t care- I just assumed that it would be enough to pay back my loans and have enough leftover to live like a normal person. I did not understand the concept of debt-to-income ratio and how much student loans would affect my finances going forward. Hopefully, continued transparency about salaries will allow prospective and current vet students to evaluate their own financial situation with a more discerning eye.

BUDGET

The AVMA has also come out with a personal financial planning tool. It is only open to AVMA members, so I figured this would be the best time for me to rejoin the AVMA after a long hiatus.

So was it worth the $155 I spent on my AVMA membership fee?

As someone who has designed my own spreadsheets and has regularly tracked my spending, I think this is an awesome tool. It essentially creates your budget for you. Don’t cheat when you enter your numbers, otherwise the final summary won’t do you any good.

You start with basic information, like your email, zip code, marital status, number of dependents, whether you were an in-state or out-of-state graduate, and your occupation.

Then you enter your income. There is a separate space to enter your partner’s income (if applicable) in order to calculate your total household income.

Next, you go through the exercise of listing all of your expenses. This part can get long, because adulting requires lots and lots of expenses. If you’ve never built a budget before, be prepared to be a bit overwhelmed by all the different ways money can be spent.

The very first one is taxes. In this post, I had discussed how your monthly take home pay is much smaller than your salary divided by 12. The difference? Taxes (as well as any other pre-tax contributions, but mostly taxes). I’m not sure that every new graduate understands this concept until they get their first paycheck. It’s simply the reality of being a wage earner in this country.

You will need to enter the percentage of state income tax, federal income tax, and FICA. Don’t worry- you can click on one of the question marks and it will open up a new window where you can enter your home state, and you will get an estimate of what you’re paying in taxes according to your gross income. Go back to your original screen with these percentages and move on.

The following are the other expense categories: debt/loans, housing/utilities, transportation, food, medical, professional development, recreation, personal/clothing, saving/retirement. Each category has a number of subcategories, so you should be able to enter almost every aspect of your spending into this planning tool.

Finally, you get a summary report. There is a bar graph showing your annual income in blue. Then directly underneath is your annual expenses in green. If your income is larger than your expenses, you’ll see your surplus number in the upper right-hand corner.

My thoughts: You will likely not know what you’re spending in each category, so when you go through this planning tool, don’t expect that you’ll get an accurate summary right off the bat. Enter what you can right away. Go through your files or online accounts for other expenses, like your car registration fee or your insurance premiums. Then start tracking your spending for all remaining subcategories for at least a month so that you can get some ballpark numbers. The longer you track, the more accurate your numbers will be. Refer to this post to see a sample of how I track my expenses.

The great thing about this planning tool is that you don’t have to reinvent the wheel- all of the categories are there and you can just jump in with your numbers. Because it was developed by the AVMA, the “professional development” section is specifically geared towards those in the veterinary profession. It can be updated at any time to reflect any changes to your income and expenses. You can use it to see how everything changes when you change one variable (for example, what would happen if I maxed out my retirement account this year? Or subsequently, what would happen if I won the lottery?). Your information gets saved and you can do a year-to-year comparison going forward.

As I’ve mentioned previously, I’m a spreadsheet kind of gal. But I bet the popular apps like Mint and YNAB work very similarly to AVMA’s financial planning tool. It doesn’t matter which one you use- just find something that you like!

I’ve dedicated a number of posts to budgeting, or what I like to call creating a spending plan. There’s a reason: because if you want to be serious about managing your money properly, you need to know exactly what you’re doing with it. If you’re finding yourself clueless about your own finances, then that’s a sign that you need to come up with a game plan. Control your money now so that it doesn’t end up controlling you later.

CONCLUSION

I’m glad to see that the AVMA has put together some resources dedicated to personal finance. The topics of debt, income, and budgeting are so important. These subjects need ever more attention as we continue to see the debt-to-income ratio rise with no signs that this will be a reversing trend anytime soon. Even for those that graduated with no debt, understanding your finances is crucial to making smart financial decisions.

Here is the link for the AVMA Lead and Learn Webinars. Anyone can sign up for upcoming webinars. You can access past webinars, such as this one, through this link if you are a current AVMA member.  Always strive to learn something new every day!

Have any of you used these resources? Have you found them helpful? Would you change or add anything? Comment below!