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Veterinarians are dedicated to the well-being of animals, but the burden of student loan debt often looms over their financial stability. For those on an income-driven repayment plan, finding effective strategies to alleviate this pressure is crucial. One often overlooked approach is leveraging the power of pre-tax 401(k) contributions. By understanding how pre-tax 401(k) contributions intersect with income-driven repayment plans, veterinarians can potentially reduce their student loan payments while simultaneously building a secure retirement nest egg.

Understanding Income-Driven Repayment Plans for Veterinarians:

The cost of education and specialized training often leaves veterinarians burdened with substantial student loan debt. Income-driven repayment plans offer relief by basing monthly payments on discretionary income, taking into account factors such as family size, income, and federal poverty guidelines. This approach makes loan repayment more manageable, particularly for those with high debt-to-income ratios.

Harnessing the Power of 401(k) Contributions:

Veterinarians can harness the benefits of income-driven repayment plans by increasing their 401(k) or other pre-tax retirement contributions. This strategy involves diverting a portion of their income into a 401(k) account, effectively lowering their adjusted gross income (AGI). Since AGI plays a key role in calculating student loan payments, reducing it through 401(k) contributions can help veterinarians lower their monthly obligations while simultaneously building a solid retirement fund.

Example:

Let’s consider a real-life example to illustrate the potential impact of a 15% 401(k) contribution on student loan payments for a veterinarian.

Dr. Johnson is a single veterinarian with $220,000 in student loan debt and an annual salary of $140,000. She is on an income-driven repayment plan, and her monthly loan payment is currently $949.

Currently, Dr. Johnson is contributing 3% of her income to her 401(k) account, which her employer matches up to 3%. Her current AGI is $135,800, and she has a student loan payment of $949 per month.

Now, let’s see how increasing her 401(k) contribution to 15% impacts her student loan payments. With an annual salary of $140,000, Dr. Johnson now contributes $21,000 ($140,000 * 15%) to her 401(k) account annually. Her employer matches this amount with an additional $4,200 (match remains at 3%), resulting in a total contribution of $25,200 per year.

By increasing her 401(k) contribution to 15%, Dr. Johnson’s AGI decreases to $119,000 ($140,000-$21,000). With this lower AGI, her income-driven repayment plan recalculates her monthly student loan payment down to approximately $809. This means Dr. Johnson saves $140 per month, or $1,680 per year, in student loan payments.

Furthermore, Dr. Johnson benefits from her employer’s matching contributions, which effectively boost her retirement savings. With a total contribution of $25,200 per year, she takes full advantage of the employer match, resulting in accelerated growth of her retirement nest egg.

If you are a practice owner or self-employed relief veterinarian, by establishing your own retirement plan you can take advantage of the 401(k) benefits as well, both from the employee and employer.

Benefits and Considerations for Veterinarians:

1. Reduced Student Loan Payments: By increasing their 401(k) contributions, veterinarians can lower their AGI and significantly reduce their monthly student loan payments, providing immediate financial relief.

2. Tax Advantages: Contributions to traditional 401(k) plans are tax-deferred, reducing taxable income and generating immediate tax savings for veterinarians.

3. Retirement Savings: Consistent 401(k) contributions enable veterinarians to build substantial retirement savings over time, taking advantage of employer matches and the power of compound interest.

4. Employer Matching Contributions: Taking full advantage of employer matches allows veterinarians to bolster their retirement savings

1. Long-Term Financial Security: Adopting this strategy early in their careers allows veterinarians to maximize the time their retirement savings have to grow. Compound interest plays a crucial role in building a substantial 401(k) balance, ensuring financial security and independence during retirement.

Conclusion:

Veterinarians carrying the weight of student loan debt while enrolled in income-driven repayment plans can benefit from increasing their 401(k) contributions. By lowering their adjusted gross income, veterinarians can reduce their monthly student loan payments while simultaneously building a robust retirement savings. This strategic approach provides immediate relief from student loan obligations while laying a foundation for long-term financial well-being.

It is essential for veterinarians to seek guidance from financial advisors or retirement planning experts who can help tailor this strategy to their unique circumstances. By leveraging the power of 401(k) contributions, veterinarians can navigate the intersection between student loan repayment and retirement planning, leading to a more secure and prosperous future.

Andrew Langdon is a CERTIFIED FINANCIAL PLANNER™ and CERTIFIED Student Loan Professional™ with VetWorth, a fiduciary fee-only firm dedicated to serving the unique needs of veterinarians and their families. For more information or to speak with Andrew, please visit us at vetworthfinancial.com

Self-employed relief veterinarians often grapple with the challenge of managing unpredictable cash flow, which makes it difficult to plan for taxes and expenses, save for emergencies, and achieve financial stability. However, the ProfitFirst system offers a solution that empowers relief veterinarians to take control of their finances and establish a solid foundation for long-term success. In this article, we will delve into the ways in which the ProfitFirst system can assist self-employed relief veterinarians in effectively managing their variable cash flow, drawing on real-world examples to highlight its practical benefits.

Understanding the ProfitFirst System:

Developed by Mike Michalowicz, the ProfitFirst system is a financial management methodology designed to prioritize profit and enhance cash flow management for businesses. It advocates for allocating a percentage of revenue towards profit, ensuring consistent profitability even during periods of fluctuating income. By providing a clear framework for income organization, expense management, and informed financial decision-making, this system equips self-employed relief veterinarians with the tools they need to succeed.

Example: Relief Veterinarian, Dr. Sally Jones:

Let’s consider Dr. Jones, a self-employed relief veterinarian who frequently encounters income fluctuations. Prior to adopting the ProfitFirst system, Dr. Jones struggled to set aside funds for taxes, savings, and personal expenses. Consequently, she often found herself living paycheck to paycheck, plagued by financial uncertainty.

Upon implementing the ProfitFirst system, Dr. Jones started allocating a predetermined percentage of her earnings to different accounts. She established separate bank accounts for profit, taxes, owner’s pay, and operating expenses. For instance, Dr. Jones decided to allocate 5% of her revenue to profit, 15% to taxes, 50% to owner’s pay, and 30% to operating expenses.

With this system in place, Dr. Jones witnessed transformative changes in her financial situation. She accumulated reserves in her tax account, ensuring she had sufficient funds to meet her obligations when they arose. The consistent income from the owner’s pay account covered her personal expenses, instilling a sense of stability. Moreover, the profit account served as a reward for Dr. Jones’s hard work, enabling her to invest in professional development and foster business growth.

No more struggling to find money when estimated quarterly taxes or business credit cards are due since these expenses are being accounted for in their respective accounts when income is received. Whether the income received for the specified period is $10,000 or $20,000, the ProfitFirst system allocation percentages helps to ensure each account is adequately funded for its purpose. Take a look below for a graphical representation of Dr. Jones receiving $10,000 in gross revenue, and where each dollar earned is going

Now, you may have questions about how to set these allocation percentages. And truth be told, it will be a work in progress for a few iterations and something that should be monitored and adjusted as necessary. The ProfitFirst system refers to these as current allocation percentages (CAPs) and target allocation percentages (TAPs).

Current allocation percentages refer to the current distribution of funds across various accounts in a business. These accounts typically include Profit, Owner’s Compensation, Tax, and Operating Expenses. The current allocation percentages reflect how much of the business’s income is currently allocated to each account. This will take some initial self reflection and understanding of your relief vet business to set up.

Target allocation percentages represent the desired distribution of funds across the different accounts. The target allocation percentages are based on the financial goals of the business owner and provide a roadmap for achieving those goals. They often involve allocating a predetermined percentage of income to Profit, Owner’s Compensation, Tax, and Operating Expenses.

For example, Dr. Jones examines her current financials and determines her current allocation percentages. Let’s say her current allocation percentages are as follows:

Profit: 5%

Owner’s Compensation: 35%

Tax: 15%

Operating Expenses: 45%

After she establishes her financial goals she decides on the desired distribution of funds. Let’s assume she wants to increase profit and owner’s compensation while maintaining her tax but reducing her operating expenses percentages. She sets her target allocation percentages as follows:

Profit: 10%

Owner’s Compensation: 50%

Tax: 15%

Operating Expenses: 25%

Dr. Jones will regularly monitor her finances to track progress towards her goals. If she finds that the current allocation percentages are not bringing her closer to her targets, she can reassess and make further adjustments as needed. This may involve modifying her pricing, reducing expenses, or finding ways to increase revenue.

Conclusion:

The ProfitFirst system equips self-employed relief veterinarians with a practical solution to effectively manage variable cash flow. By allocating a percentage of their income to designated accounts, relief veterinarians can prioritize profit, ensure the fulfillment of tax obligations, and enjoy a consistent owner’s pay. Real-world examples of Dr. Jones demonstrate how implementing the ProfitFirst system provides financial stability, facilitates business reinvestment, and eliminates the stress linked to unpredictable income. By embracing this methodology, self-employed relief veterinarians can gain greater financial control and establish a solid foundation for their businesses. The ProfitFirst system empowers them to navigate the challenges of variable cash flow, ensuring profitability, meeting tax obligations, and achieving personal financial stability. By adopting the ProfitFirst system, self-employed relief veterinarians can pave the way for long-term success, effectively managing their finances and thriving in their professional endeavors.

For those interested in this system, I highly recommend reading the book by Mike Michalowicz which can be found on Amazon. There are also YouTube videos highlighting some of the key points which can help visualize how this system would work for you.

As defined by Merriam-Webster, consumerism is the idea that the consumption of goods is desirable. Stated differently, buying new things will make me happier. If only I had that new coat, car, kitchen appliance, toy, if only…if only… if only. Then, you get that desired object and are happy, but only for a short while. Eventually, the novelty wears off, and the question becomes, what can I buy next to make me feel happy again? The cycle begins again.

This phenomenon is not new, and in the mid to late 1700s, a French philosopher by the name of Denis Diderot experienced this firsthand. He recorded his journey from poor to rich, and back to poor again. Wait…back to poor? How did that happen? Consumerism?

Dennis Diderot was one of the leading minds during the Age of Enlightenment, and one might think he is immune to issues around simple decisions of whether I should buy this shiny new thing. Turns out even a brilliant human is still just a human. In his essay, “A Warning to Those Who Have More Taste Than Fortune,” he gives experience.

“I was an absolute master of my old robe; now, my new one is the master of me.[i]” Diderot had the good fortune during his life to acquire wealth after working with a royal figure of the time. And with this wealth, he decided to buy a new beautiful scarlet robe of the finest quality to replace his well-worn older robe. He marveled at its beauty and its increase in social status until he realized some key facts about his house, which still showed the signs of his recent poverty. There is no more coordination in his life. His old straw chair, his stained rug, the empty, dusty spaces in his house, and his worn desk were all disgustingly insufficient when illuminated by the radiant glory of his new scarlet robe. The plain objects of his home, which he never thought twice about, were suddenly not enough compared to his new robe’s rich elegance. And his home had to change.

In a short time, Diderot had spent every penny of his fortune and went deep in debt to pay for his “upgrades.” All because a new robe clashed with his older furnishings and possessions. And yet, after getting everything he ever wanted and more, he was miserable because he was no longer the master of his life. His money was.

If you find your money is your master and want to regain control, you can reach me at connect@opendoorsfp.com, or HERE and we will walk together on a path to success.

              For a fun video that shows this concept in a different way, check out this link.  https://youtu.be/hUNxBSiV4ZY.

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[i] https://www.marxists.org/reference/archive/diderot/1769/regrets.htm

Graduating from veterinary school is a momentous occasion and one that any student should be incredibly proud of doing. As you leave the confines of your college campus and begin your life in the “real world,” the financial burden of graduating with student loan debt becomes a reality. Sitting at around $1.48 trillion nationwide, student loan debt can be scary to face alone – but that doesn’t mean it should be avoided._¹  If you’re a recent veterinary school graduate with a significant amount of student loan debt left to repay, here’s what you can do right now to help.

Tip #1: Focus on Building Good Credit

For some recent graduates, paying back federal student loans will be their first entry into building credit. In fact, only 57 percent of undergraduates reported having a credit card.²  If you have gone without a credit score of your own thus far, paying back your student loan debt on time and in full is critical. Federal student loan lenders report to the three major credit bureaus – Equifax, TransUnion, and Experian. If you miss a payment or pay late, which can negatively affect your overall credit score. Building good credit now is incredibly important as you navigate life in the real world. Good credit is needed to secure loans like auto loans and house mortgages. If you don’t have a credit card yet, consider applying for one and using it to help further your credit score. Paying your credit card bill monthly can help boost it.

Tip #2: Always Pay On Time

Paying your bills late (including student loan repayments for any vet school or undergraduate degrees) can hurt your credit score and cause you to incur late fees or penalties. Pick a certain time each month to make a payment, and set a recurring alarm on your calendar. If you have the option, consider setting up an automatic payment plan – which would allow you to set it and forget it. This would eliminate the possibility of forgetting or missing a payment. 

Tip #3: Consider Reprioritizing Your Debt

This may sound counterintuitive, but maintaining your student loan debt and focusing on other debt types could be beneficial in the long run. While you don’t want to let your student debt payments lapse, you may want to funnel anything extra toward other debts with higher interest, such as personal loans or credit cards. High-interest debt can get out of hand quickly because outstanding amounts earn interest much higher than low-interest debts like student loans, auto loans, and mortgages. Paying off your monthly credit card amount will help you avoid paying
unnecessary interest and help avoid hikes in interest rates. It’ll take time to pay off your student loans. But following these positive practices can
help you establish good credit, maintain your debt-to-income ratio, and help prepare for other purchases like a car or a home or even bigger things such as buying into a veterinary practice. Developing healthy financial habits now can serve as a foundation for financial wellness throughout the rest of your life. A good way to start is looking into
loan forgiveness options, such as the Veterinary Medicine Loan Repayment Program, which will pay up to $25,000 per year towards educational loans if you serve in an area with a veterinarian shortage.

1. https://www.newyorkfed.org/medialibrary/interactives/householdcredit/data/pdf/hhdc_2019q2.pdf
2. https://wallethub.com/edu/cc/credit-card-statistics-for-college-students/25535#:~:text=Majoring%20in%20Money)-,Students%20with%20Credit%20Cards,compared%20to%202013%20(30%25).

For the audio version and discussion of this article, click the Spotify link below.

There is nothing wrong with being frugal or liking a deal. I titled this the cheapskate’s way to stack bitcoin because today, there is an asymmetry to earn satoshis (what are satoshis?)  or sats. All you have to do is adjust how you spend slightly, and the rewards over time are tremendous as we see bitcoin adoption increase. Rewards in bitcoin accrue value, while airline miles and cash back lose value over time. BIG difference and why this is even cooler.

First, the following resources should be checked out if you need to learn more about bitcoin. These will help you build my conviction that, eventually, bitcoin will become the world’s money of choice. If you consume some of all of the following resources, you will quickly become more educated than 95% of the people in the world. I’ve reached podcasts on this on my podcast HERE. For some of my favorite resources, check out the below.

• The Bullish Case for Bitcoin – Vijay Boyapati
• Gradually, Then Suddenly – Parker Lewis
• The Bitcoin Standard: The Decentralized Alternative to Central Banking – Dr. Saifedean Ammous
• Bitcoin First: Why Investors need to consider bitcoin separately from other digital assets
• Bitcoin Fundamentals

Second, let’s get down to how to earn bitcoin on daily living. I conservatively think you can earn 3,000,000 sats per year following what’s laid out below. That’s $600 USD – but if bitcoin eclipses gold simply as a store of value (low bar), that’s $15,750 USD*.

We all have somewhere we call home. The Fold Card allows you to make every spend you make eligible for bitcoin rewards. On the go and buying gas – bitcoin rewards. Paying your mortgage or rent this month – bitcoin rewards. Dining out with friends – cover the bill and have them pay you back (earn bitcoin). Pretty cool, huh?

The best part of the Fold Card for us has been the mortgage rewards – how else do you earn 2% back on one of the biggest monthly bills? This has been incredible to earn money back on that expense. 

Strike is a fantastic tool to use the bitcoin network in various ways. First, it allows a user to easily take dollars and pay lighting invoices (bitcoin layer two for commerce and sub – $500 payments). Strike offers a user the ability to buy bitcoin (KYC – which is normal for most exchanges) with only a small spread of 0.30% or so – which is super handy. You can also establish a direct deposit and auto purchase for bitcoin via Strike, which is cool. Lastly, Strike is building a commerce platform for payments – working to lower the costs, be more efficient, faster, fair, and for all.

One big issue that you might have experienced prior is an owner chargeback– when someone pays a bill with a credit card and then claims it as a fraudulent payment or unknown. The story I’ve heard used was in Miami, a high-end tattoo parlor did $7,000 of work on someone from out of town – they left paid via credit card and then claimed the card was stolen and even though there was camera footage of them in the parlor. The artist had to eat the $7,000 worth of work – with bitcoin and the lighting network, this doesn’t happen. You can download the app, but it also does have a chrome browser extension. If you use code I0IASX when you sign up, it’s $10 for you.

Shopping online and online bill pay is the norm – no one is mailing checks in for bills (sorry if that offends anyone that is 😂). Pay with Moon is an awesome tool for being able to use/leverage a strike payment to pre-load a Visa debit card and earn 5% back automatically every time (the reward is deposited in your Strike account as cashback – can instant convert to bitcoin or just trim the $ off the purchase price). The reward is through an engagement with Strike and Pay with Moon – but anything online – bills, Amazon, pizza, or shopping it’s an awesome tool. I had had one experience with our local utility billing that rejected the Pay with Moon Visa – but outside of that, I’ve used it  20+ times and had nothing but success.

Bitrefill and Strike, to me, is the ultimate pairing of fantastic rewards and flexibility to leverage the lighting network and earn rewards. So Bitrefill’s mission is to live on Crypto – replacement crypto with bitcoin, and now we are talking. Bitrefill allows users to use bitcoin or lighting payments to buy gift cards and bill pay. So the bill pay feature, which is my favorite, allows users to pay their credit card off using bitcoin or lighting. Now there is a 0.99% fee, but similar to Pay with Moon – Bitrefill and Strike have an automatic 5% back when paying a lighting invoice with Strike(the reward is deposited in your Strike account as cashback – can instant convert to bitcoin or just trim the $ off the purchase price). So you can literally earn rewards for paying your credit card bill – GAME CHANGER – the same can be done for student loans. If/as they come back as a bill – image stacking bitcoin as you pay bills. That’s Bitrefill – also, to give you an example, at the moment, they are running a special on Lowe’s gift cards – 10% back at Bitrefill – which means that’s 15% when paying with Strike to do your home maintenance. This is a duo that’s hard to beat – this is likely the best tool I can recommend once you get the feel for it. The mobile app makes it super easy to be out and buy gift cards on the go at restaurants and stores. Not that I’ve been that guy or anything.

Lolli if you are familiar with Rakuten or Honey, same idea here with a twist. The mobile app can be connected to a credit card, and you can earn 10% + back – the one that is my wife’s favorite is the Starbucks connection. For those who might not be familiar with Rakuten or Honey, Lolli is a mobile app or Browser extension that allows you to earn rewards when shopping – and there are many stores and retailers out there. It does negate if you use a gift card – so you cannot double stack, but you could use Pay with Moon to double stack rewards. I use Lolli most for travel bookings – whether it’s flights/lodging/car rentals, it’s an easy way to earn rewards. There is next to no effort needed, so this is likely the easiest one to implement.

So how do I use the above tools?

Fold is for all spending out in daily life where there are no gift cards – think local places you love and pay my mortgage. If Bitrefill has your mortgage payment available – you might want to check that out, as your rewards might be higher and more consistent there. Strike and Bitrefill I use the most as this is for paying for any gift cards for purchases and spending, plus paying off my wife’s student loans (refinanced them – I know foolish), credit cards, and others. I use Pay with Moon – when/if it’s an online bill pay or purchase and I cannot get a gift card for it or if I want/can stack with Lolli (remember the reward is negated by the gift card usage). Lolli for me is travel mainly – the stores offered are not frequented by our family but might be some great options for gifts for you there.

 Does the above feel a little gimmicky? Sure – I can appreciate that view, but I’m often able to be earning rewards on almost every spend. Often I can find a way to earn high single digits back on spending I’m already doing or never could earn rewards on prior. If you aren’t a dye-in-the-wool bitcoiner like yours truly – the Strike Bitrefill stack is great as the bulk of those rewards are back as cash and can then be withdrawn back to your bank. The only bitcoin rewards would be from Bitrefill. Also, the credit card payment makes this worth it!

What do you think what option do you like best and want to implement? Did you learn anything – jump in the Facebook group and let me know!

*The bitcoin price to eclipse gold would be $525,000 and have a market cap of $12 Trillion. 

Julie Squires a Certified Compassion Fatigue Specialist, Certified Life Coach & Podcaster interviewed Isaiah Douglass, MBA, CFP®, CEPA to talk about money. She asked, “What’s one non-consensus view you have on personal finance for veterinarians?”

Tune in to check it out!

Check out Jules’ podcast here ➡ http://rekindlesolutions.com/podcast/

Meredith Jones, DVM, and Phil Zeltzman, DVM, DACVS, CVJ, FFCert asked Isaiah Douglass, a Certified Financial Planner, to weigh in with his expert advice on burning financial questions we’ve received from vets. Isaiah is a partner in Vincere Wealth Management and the host of the Veterinarian Success Podcast.

– How do financial planners get paid?

– When to know if you need a financial planner / advisor

– What are the purposes and benefits of seeking financial advice?

– How to save for the “tax bomb” at the end of income-driven student loan repayment

– What is the difference between compound interest vs. simple interest?

– Why Isaiah is such a big advocate for practice ownership

– What self-limiting beliefs keep vets from building wealth?

002 Burning Questions for a Financial Planner – Isaiah Douglass

Disability insurance isn’t exciting to think about, but worse than that is ignoring it until it’s too late to get it. Veterinarians should not skip out on this important insurance.

Read Dan Routh’s Post on dvm360 here.

In this episode, the tables are turned, and Dan Routh takes control of the microphone and interviews Isaiah. Dan digs into Isaiah’s story and his background.

• How did someone born on a farm find his way to financial planning?
• His journey to starting his firm and the “why” behind it.
• Why veterinary medicine?
• Why is he so adamant about ownership in veterinary medicine?
• The two critical questions for anyone to ask a financial advisor.
• The story of the podcast and why it was started.
• VetPartners and why the organization is so essential to the industry.
• His answer to the success question he asks all his guests.

Website: www.vincerewealth.com

LinkedIn: https://www.linkedin.com/in/isaiah-douglass-mba-cfp%C2%AE/