From Debt to Wealth: A Practical Plan for OTs

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Learn more about my guest
Facebook: https://www.facebook.com/doug.vestal.5

Website: https://www.freedomofpractice.com/

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Transcript

Lindsey Vestal:
Doug, I had this idea to start this kind of case study snapshot, if you will, of all the different OTs that you have the pleasure of interacting with, either students that have worked with you in your private pay MBA course and your mentorship, or students who have read your book Financial Freedom for OTs and have reached out to you, because let's face it, we don't talk about money enough, just like public health, we don't talk about money enough. And so I had the pleasure of hearing these conversations and hearing all of the incredibly tangible advice that you give these students. And I know that so much of these conversations that you're having are universal, we can see ourselves in them, we are wondering and asking the same thing.

 So thank you for coming on the podcast today, to kind of give us like a snapshot profile of a recent conversation with a student that you had, that I think so many are going to enjoy eavesdropping on and kind of getting some nuggets of wisdom from. 

Doug Vestal:
Yeah, thank you so much for having me. And can I just say, from the very beginning, because I support a lot of OTs pursuing entrepreneurship and everything. And I think Lindsay, one of the reasons why you're such a great entrepreneur is because you take so much action. And this is something that I talk to my students a lot, but this is a prime example. So earlier today, I had a phone call with a student, less than two hours ago, you overheard that phone conversation, because it was taking place in our living room. And you said, Doug, what that advice you just gave him is something that more OTs need to hear about. Why don't we start a regular monthly podcast where you're discussing a case study from a personal finance perspective from an OT lens. And here we are less than two hours later, recording the episode. And I just want to highlight on this, because for a lot of the OTs that I support in private pay practice, taking action is everything. You know what I mean? Moving from idea to execution very, very quickly is something that is incredibly important. And this just happens to be a prime example of that. So I wanted to step back from the 30,000 viewpoint from the meta, just as maybe a sense of inspiration to some of your listeners who are working on private pay to go, you know what, today's the day I'm going to hit pause right now, please don't keep listening. But I'm going to hit pause right now and call that referral source that I've been putting off, you know, or I'm going to call that gym and offer to have a workshop there, right? I'm going to do it now. I go from the idea to the execution, and I eliminate the space in between. So all that said, I'm super happy to be having this discussion with you today. 

Lindsey Vestal:
Awesome. All right. So I want us to start off with exactly the way we're going to start off all of these, which is kind of like giving us some insight. I always think about this like a informal chart review, kind of give us the background of this gentleman that you talk to just so that we can make sense of some of the advice that you gave him. 

Doug Vestal:
Yeah, so I'll keep the name anonymous. And he is a first year OT student. He is graduating in 2026. So with the book coming out, I've had the honor of speaking at a lot of state associations, as well as a lot of universities, and you know, everybody gets my email address. And so this particular student emailed me afterwards, and I jumped on a phone conversation with him earlier today. So I won't mention his name, but he's a first year OT student. He graduates in 2026. He's currently married to someone who works in public service, and they are living off of her salary, right? So he's obviously full time in school and not earning anything. She does not make a lot of money. She works in public service. They don't have any kids, and she doesn't have any student loan debt. After he graduates, their goal is to buy a new car, as well as they're currently renting, so they want to buy a house. He has $180,000 of student loan debt right now. Some of that is from undergraduate, but most of that is graduate. And the interest rates that he has on that student loan debt is between 7% to 8%. It just depends on the exact loan. All of the loans are federal, and so he's thinking that after graduating, he's going to enroll in PSLF, so the Public Service Loan Forgiveness Program. And right now, he's torn. He doesn't know exactly what population he wants to work with. He went into grad school thinking it was going to be peds, but then just through his interactions with professors, he's thinking he's really feeling call it to geriatrics, but he's going to kind of figure it out in his field work. His favorite occupation is weightlifting, and as I mentioned earlier, they're currently renting and they're driving two used cars. 

Lindsey Vestal:
Okay. All right. That's a great overview. I feel like I kind of have a handle on his situation. Now, when he reached out to you, when you guys got on that phone call together, what was his burning question? What is the thing that he thought, like, I would love, heard Doug talk, loved his really approachable style. What was that burning question that got him to write you the email and then get on a phone call with you? 

Doug Vestal:
Yeah, he's really at this crossroads, and kudos to him for thinking about it this far ahead of time. So I mentioned he has that $180,000 of student loan debt, but then in the course of talking with him, it came out that actually he has $180,000, but he's only spent $100,000 of that on schooling. The other $80,000 is actually, for lack of a better word, let's just say sitting in his checking account. 

Lindsey Vestal:
Doug, is that common? Do a lot of students have some leftover money that they have this question about? 

Doug Vestal:
Yeah. Especially if you're living on your spouse's salary, because if you're taking out the full amount, you're taking out your tuition as well as room and board. And so he's really maximizing the amount of loans based upon his estimated cost of living. And so that's where that extra $80,000 came from. It might be $20,000 for others. Some people might not even have it because they spent it. They didn't have a spouse to support them, so they are using it for food and rent and utilities. So this is an interesting case, because he's got the $180,000 of debt, but $80,000 is basically sitting in cash. He is investing it a little bit. And his main thing that he said to me was that he wanted to know whether or not he should keep that $80,000 for the down payment on a new home when they graduate. 

Lindsey Vestal:
Oh, interesting. Okay. 

Doug Vestal:
And that's the reason why he's keeping it there. And that was his main question coming to me is he views the $180,000 of student loan as something that he's having. He'll enroll in PSLF, and he didn't really care the setting that he was going to work in, because he just wanted to be able to get the public service loan forgiveness. And so he wanted to know if it was a good idea to use that $80,000 that they're saving as a down payment for their house. 

Lindsey Vestal:
Okay. I'm so curious. What was your take on this? What did you tell him? 

Doug Vestal:
I mean, look, it's a fine line, right? So I always answer it from the perspective of what I would do, right? He obviously has the goal of buying a new car, getting a house and everything. But I always think we need to understand the consequences of all of this. So I started asking him more, and that's how I came to find out that he was really feeling called to work with geriatrics in acute care setting. And I know from working with so many OTs that that is a prime spot for burnout, right? Unfortunately, just calling it is what it is. And I said to him, look, I would consider this. You're going to have $180,000 student loan debt. Yes, you can enroll in PSLF and your payments will be reduced, but you're going to be a new OT figuring out a new work environment, a new work rhythm. And then when you add on top of that, a new car payment, and you add on top of that, a new mortgage payment, that's a lot of change very, very quick. But that's a lot of stressors all at the same time, right? And we've seen this story repeated so many times that it sounds like a great idea. You're graduating, you're going full adulting mode, you know, you feel like it's the responsible thing to purchase a house, but that can really make you stuck because what if two years into it, you want to move towns, you want to move cities, there is a better work environment that's 45 minutes away, but you really don't want to commute, and it would be easier to move closer. Especially when you're really young in your career, I think choosing optionality, because those first five years, first seven years, things are changing so much. They might have kids, you know, and so my recommendation was actually take that $80,000, pay it towards $180,000, so now you have $100,000 of student loan debt. When he graduates, we'll probably be making around $70,000 a year, and that would equate to about $50,000 after taxes. And one of the things he said to me is like, look, my wife is really tired of only living on her paycheck, right, because it's not very high, they're making it work, they don't want to do this forever.

 Lindsey Vestal:
Yeah, they're excited to have that second income. 

Doug Vestal:
Exactly, and so I was like, fantastic, but what would you consider out of your $50,000 of take-home pay when you graduate, take $15,000 and put that towards your lifestyle. That's an extra $1,200 a month you can upgrade from renting an apartment to renting a house, right, you can spend some of that extra money towards date nights and extracurricular activities, so making memories with your spouse, and that leaves you $35,000 to throw towards your student loans. And at that rate, you can be out of your student loan debt in just three years, and then that minimum monthly payment that you've had from your student loans is suddenly gone, and now you have an extra $50,000 a year in your budget with the lack of student loans, right, so your income went up and your expenses went down, which is a great way, and then, you know, allocate some portion of that to savings. So now you have this extra $50,000, take $20,000 of that and start investing in your 401k, your Roth IRAs, and if you invest $20,000 over, you know, 20 years, you will be a millionaire, and after 30 years, you'll have around $3 million, so it adds up really quite quickly, but it's important to do that now, you know, because he's at such a critical stage of his career. 

 Lindsey Vestal:
Okay, and then, you know, he had that question about the PSLF. What did you tell him about that? 

Doug Vestal:
So, you know, PSLF is interesting. It can be, what I always say is it's really good for reducing your monthly payments, right, and I talk about it a lot in the book as well as other non-PSLF plans like SAFE, but the thing about it is that you have to work for a qualifying company, right? Not every company qualifies for PSLF, so you're already limiting the choices in which you can work, and so I just had him think about and reflect on, okay, do I want to be in a situation where I have the maximum amount of student loans, I've taken on the maximum amount of debt right out of graduate school with a new car, a new house, and now I'm, that trade-off for doing all of those things is that I'm enrolling in a PSLF program where I'm limiting my flexibility and work conditions, and so what I worry about is that you're going to feel a squeeze on both sides. It's going to be really hard to move employers, right, because you're going to be wedded to this, and you're going to have really, really high expenses already, and so if I was in his shoes, I wouldn't do PSLF. You know, I would just pay off the student loan debt as fast as possible and then look for ways to increase your income over time to make up for the fact that you paid off your student loan debt early. 

 Lindsey Vestal:
And I think that would also enable him to take advantage of compound interest, which there's another episode that we've done in the last couple episodes where you really break down compound interest. You do an amazing job in Financial Freedom for OTs, your recent book, but I think that basically what you're highlighting too is giving him the capacity to be able to take advantage of compound interest by making some of those choices.

Doug Vestal:
Yes, exactly. Yeah, that $20,000 example, right, if he can pay off his student loan debt now very quickly, in the other scenario of him doing PSLF and him taking on a really expensive mortgage and new cars, they wouldn't have any of that extra money. So kind of right away, all of this additional income you have as a new OT is going to go towards debt payment, payment on the mortgage, payment on the car, payment on your student loans. And that's where I think OTs get stuck is feeling like they're rocking a hard place because on a monthly basis, all of their income is going towards basically paying the bank, you know, and I want you to pay yourself, like I want you to keep that money, you're already working so hard for that money. Let's not give it to the bank. Let's save and invest it for yourself. So you have financial freedom, so you have occupational choice. 

Lindsey Vestal:
All right, so I have a good sense of what you shared with him. And I think one of the other things that you mentioned was he had a goal to buy a new car, both him and his wife had had, you know, some older cars, they were both driving. And I think they did have some car payments on that. But he was really interested in upgrading and buying a new car. What did you tell him about that one? 

Doug Vestal:
Yeah, I told him basically, like you can do anything, but not everything. And so it's a matter of timing and importance. And so I wouldn't buy a new car. A, personally, new cars depreciate 30 to 40% once you drive them off the lot, like many times you're much better off buying a gently used car. And then what I told him is pay cash for that. So after you pay off your student loan debt, if you have a car that you have your eye on, then the way you know that you can afford it is that you can pay cash for it. And so you save up that amount over time. And that is part of adjusting your lifestyle and your expenses so that you have that extra money to start putting towards those large purchases over time. 

Lindsey Vestal:
Okay. Okay. Amazing. Thank you so much for sharing that reiterating that conversation. I think it's going to be extremely helpful just to kind of hear your logic and the way you approach this. And also, I think that so many of our listeners are going to be able to put themselves in their own shoes as this new grad or excuse me, this new OT student and sort of some of his quandaries and questions and thought process. So thank you so much for sharing that with us today. 

Doug Vestal:
Yeah, absolutely. I'm so excited for this series that we're going to be doing. I think it's going to be really beneficial. And I think we're going to have a forum so that people can submit their own questions and sort of financial profile. We'll keep it anonymously. Like when we collect the information, we want to ask for your name. And so if you're interested, please take a look at that link in the show notes so that your situation can get answered in the podcast.

Lindsey Vestal:
I love it. We'll also put a link to Financial Freedom for OTs, A Guide to Burning Wealth Without Burnout, your number one bestseller. Awesome, Doug. Thank you so much. 

Doug Vestal:
Thank you.