Times are a-changing and this is most true for those graduating with a professional degree. Be it a new graduate in medicine, law, engineering, dentistry or optometry, there is a whole different world to face after the years of living in the university bubble. For a new optometry graduate, it helps to know the potential challenges that will face you in the real world after optometry school.
Here are the most important financial concepts to keep in mind after optometry school.
This is arguably the BIGGEST cause for a professional graduate to get into financial trouble. The journey from high school to becoming an optometrist is a long and difficult one. All the while you might be noticing some of your friends back home landing good jobs and getting sweet houses and cars. Graduation seems so far away, but you persevere, passing the Boards and finally being able to begin your life as an optometrist after optometry school
After years of schooling and living like a poor student, it’s only natural for one to get in the I “deserve” this mindset right out of school. As in, I “deserve” a new BMW because of all the work I put in (along with the $700 monthly lease payment). And I “deserve” a sweet new fancy townhouse since I’ve been living like a pauper the past few years (and the $2500 monthly payment plus maintenance that goes along with it). The examples are endless. With inflation eroding buying power over the years and incomes not rising in the same manner, a dollar doesn’t buy as much now as it did 10 years ago. This is an essential point to realize, as simply having a certain title doesn’t enable you to get the goods right out of the gate.
Student loan debt
The issue of the high cost of tuition and massive amounts of student loan debt is a debated one. Tuition is increasingly rapidly year after year, widely outpacing inflation. College was once thought to be an essential stepping stone for success. Sky high tuition prices are making many rethink that. While student loan debt is a big problem for all students, it is an especially big one for optometry school graduates. For the graduating class of 2012, the average student loan debt for undergraduates was $29,400. This is not an amount to sneeze at, but I probably incurred that much debt sitting through my first 5 classes in optometry school.
While my final student loan debt (undergrad and optometry school) was around $140K, many of my colleagues were well into the $200K range.
My student loan debt was almost 5 times the national average. That’s a huge discrepancy and a problem that needs to be tackled. Many students, myself included, underestimated the effect of student loan debt while in school, and who can blame us? With tests every week and clinical practical exams to prepare for, who has the time to prepare for life after optometry school?
What I’m telling you is that student loan payments will make up a substantial chunk of your monthly payments. In a lot of cases it can be the largest payment one has to make per month. Paying your loan at the maximum allotted time at an average interest rate of 6.8% can mean you effectively pay your loan twice! New grads should be prepared to pay off loans immediately. This means cutting back on your consumption and throwing extra money towards your highest interest loan and then moving to the next one (also called the Avalanche Method). If you can be diligent in this process, you can reduce the time you pay student loans by years and save thousands of dollars in interest payments.
Building a good credit score
Unfortunately, the importance of a good credit score is widely misunderstood. Most people don’t know the difference between a credit score and a credit report. I’ve noticed that this is especially widespread among new grads after optometry school. Most new grad ODs are focusing on finding their place in the world and spending their new found money.
Applying for a mortgage, credit card, apartments and a car lease will initiate a credit inquiry by the lender. They want to look at your past history to make sure you’ll pay them back. A low score means you’re not a good borrower. You get the highest interest rate possible on your loan so the lender can recoup their loan quickly. A high score means you are a pretty dependable borrower, so you get the lowest interest rate offered. On a big purchase like a house, the difference between a low interest rate and a high interest rate can cost you potentially hundreds of thousands of dollars. That’s a lot of cheddar. Giving your credit score some attention is extremely important and should be considered an investment in your future.
An optometry license isn’t a ticket to a lifetime of riches. Many new grads are falling into financial trouble by not paying attention to these three big issues. If you can weather the student loan debt storm and resist lifestyle inflation early in your career, you will be setting yourself up for a lifetime of success.
Interested in learning more personal finance basics for optometrists? Check out our video and download our free financial tools!