Welcome back! If you’ve just stumbled upon the blog and haven’t read the first few posts, make sure you go back to the beginning and get yourself caught up to speed on how we got where we are in terms of our financial situation. Also, definitely don’t miss Part 1 of the Our Progress series. It won’t take you long to catch up, and should answer any questions you have up until now on why this site exists and who we are.
If you’ve been following along, you know that when my wife and I graduated from our respective healthcare programs in 2011, we had accumulated $466,571 of student loan debt. At the time, we weren’t too worried about the amount because we were going to be doctors and paying it off would happen in no-time.
We couldn’t have been more wrong.
Some of the numbers I’ll throw out from time-to-time here on the site may be pretty hard for people to believe. Today is one of those times, and the hard-to-believe part is going to be how low the income numbers are for two healthcare professionals who have the initials “Dr.” in front of their names.
Originally the plan was to lay out our incomes down to the penny for all to see. After some back and forth debate about what we were comfortable with, a compromise was reached: Although we won’t come right out and give you exact numbers, we’ll drop a couple of big hints about the general level we started at and discuss changes in it year-after-year by percentages. That should be enough to give everyone a good idea of what we have been working with.
A Dose of Reality (What our “Doctor Income” Amounted To)
Our incomes have grown steadily since we graduated (it’s not as if they could have gotten much worse, as you’ll see) but for our first couple years out of school we were well below where we thought we’d be. There are several reasons for this, and what we’ll do here is go through each year from 2011 up to today and try to reason why the numbers were what they were for any given year.
Graduation year. We both graduated between summer and fall of 2011, and we were pretty much just happy to be done. Income information has been hard for me to come by, but I can assure you it was sparse and even if we had the numbers they probably wouldn’t be all that enlightening due to various factors, including partial year incomes.
We both used the the new-grad deferment options and didn’t really make any loan payments of consequence in 2011. Both of us went to saturated markets for our respective professions; one of us attempted a startup in a less-desirable but nevertheless saturated city, and the other worked as a W-2 employee in a private clinic that wasn’t all that busy, but was in the dream location. Not a recipe for success, as you will see.
Our first full year as doctors in our respective professions. To carry over what I mentioned just a moment ago, we were both in heavily saturated areas and neither of us took a job straight out of school that offered much in the ways of guaranteed salaries.
It’s hard to believe now, and this is one of the those numbers that I mentioned will be difficult to imagine is true, but our combined Adjusted Gross Income (AGI) for 2012 was… verrrrry low six-figures. If we take gross sales into account from the start-up it looks a little better, but not much.
I’m not joking. Two healthcare professionals. A combined 16 years post-highschool education. $466,571 of student loan debt. And our first full year of work we combined to gross less than even 1/4 of our student loan liability.
Let me be clear: We do not work in obscure healthcare professions. Far from it. And yet here we were, a year and a half out of school, barely cracking 6-figures with our combined incomes. It’s hard to believe looking back.
We’ll be the first to admit that the only people we can blame for that number is ourselves. We made a lot of decisions that first year out that helped put us in that hole; taking on a start-up fresh out of school; choosing to practice in highly saturated, popular areas; focusing on private practice work rather than going to public health.
Whatever the reasons, though, it became very clear very quickly that a debt-to-income ratio of 4:1 was not going cut-it; something had to change.
Big decisions were made this year. By June we had both been practicing for almost two years, and the numbers weren’t improving a whole lot; debt was still high, income was still low. Up to this point we had been living and practicing in separate cities, and in July of 2013 that changed.
The start-up stayed where it was, and the W-2 private clinic job in the dream location was abandoned for another, higher paying W-2 private clinic job in the same less-desirable city that the start-up was in.
The moves paid off. Combined AGI for 2013 grew by almost 18%, owing mainly to the start-up seeing a 53% increase of gross sales. The new W-2 job also got a small boost of income towards the end of the year, after the move was finalized.
Still a long ways from where we needed to be, but moving in the right direction.
Things really started kicking into gear in 2014. The start-up continued to grow, again seeing its gross sales increase by over 50%, and as the W-2 worker in the family got settled into the job we saw an increased income there of about 33% over the previous year.
Combined AGI for 2014 was up almost 43% from the prior year.
To us, this was an impressive amount, worthy of being celebrated. The reality was it wasn’t nearly enough to begin to payoff our tremendous amount of student loan debt, at least not in a timely manner. We needed to do better.
Seeing our big jump from 2013 to 2014 inspired us, and we were determined to continue the trend. The first big change was the W-2 worker taking on a part-time job. It had it’s downsides (hour commute, long-days, and a limited scope of practice in a restricted setting), but it paid well and increased the W-2’s contribution to the family income by another 34%.
The start-up had another big boost over it’s previous year, increasing its gross by nearly 60%! As any business owner knows, however, businesses don’t grow themselves. With the increase in business, an increase in investment was required; this amounted to several large purchases that cut into the business’s profits.
All told, even after accounting for the start-up’s expenses, we still improved our combined year-to-year AGI by about 16%. Our debt paydown had been ramped up for a couple of years by this point, but in all honesty, “ramped up” is a subjective term, and we’ll let you be the judge of how well we did when we dive into the debt repayment numbers in the next post. We felt like we were making a dent in it, at least.
The trend of increasing incomes continued! 2016 was a banner year for us as far as making money went, but the increase was much smaller than it had been in the years prior. Why was the income growth smaller?
It’s a simple answer, and I’ll give you a hint: It starts with a “B” and ends with a “-aby.” Yes, the DoctorsOnDebt family grew by one in 2016, and although we couldn’t be prouder parents and happier to have our little bundle of joy, it definitely had an impact on our finances.
The biggest hurdle to overcome income-wise was that the start-up leveled out a bit and didn’t see the gross increases it had been accustomed to because of some time off for the new addition. The W-2 income actually increased by a pretty significant amount, which negated the start-up’s slowdown. The best part about it was, because of an opportunity to increase work in the main W-2 job (and a raise, to boot!), the part-time job was able to be dropped altogether.
All-told, our AGI for 2016 only increased by about 4.5%. Would have liked to see that increase by a little more, but we’re not going to complain.
What will this year bring when it comes to income? Who knows. I feel confident in saying that it has started off well, so I’m hoping that we see another big boost. The higher the income, the bigger the loan payments!
So all told, over the 5-year span from 2011-2016, we increased our Adjusted Gross Income by 94%. That’s a pretty impressive number, but it comes with a qualifier: Our incomes started so low that there was really nowhere to go but up. Truthfully, we would probably still be considered low-income doctors now. To us, though, watching that income grow has made us feel full of money.
Are you familiar with the saying, “It’s not what you make, its what you keep?” In our case, it would probably be better to say, “It’s not what you make, it’s what you pay towards your student loans.”
Next time we’ll lay out exactly how much we were able to put to our loans in each year, and show you where we stand today as far as our loan liability goes.
Well, what do you think now that you have an idea of what our income levels have been since graduation? Comparable to where you were? A lot worse (that’s where I’d put my money)? Let us know what you think in the comments!