Debt Management for the New O.D.

BY WALTER D. WEST, O.D., F.A.A.O., & STEPHEN PULLEN, O.D.
DEC. 1997

An optometry school graduate has many hopes for a rewarding career. The options seem overwhelming, ranging from solo, partnership, or group practice to commercial settings and residency programs. Then reality arrives in the mailbox as a debt service notice stating a total indebtedness of between $60,000 to $120,000 for most students. This large obligation restricts graduates from considering many rewarding and viable opportunities.

FALLING INTO THE DEBT TRAP

In optometry school, most students become accustomed to living within a budget because there's very little to budget. It's easier to live within your means when everybody around you is doing the same thing. Upon graduation, too many new O.D.s expect to live the lifestyle of a doctor, and they end up with unreal salary expectations. The mentality is, "I worked hard for so many years and now it's time for my reward."

Most commercial settings are offering $60,000 to $100,000 for new graduates, and that level of income is hard to turn down. The long-term potential is limited, but with the reality of debt, too many new O.D.s sacrifice the future for immediate reward. It's hard for some private O.D.s to justify competitive incomes even though a new graduate can generate significant income for the practice in a very short time. There are private practices offering comparable salaries, but they are strongly outnumbered by the commercial opportunities.

Many young O.D.s in commercial optometry have a goal in mind that includes a three- to five-year plan of working long hours and weekends to make good money and pay back student loans quickly.

After gaining experience and reducing debt, the employment options increase. Unfortunately, I've seen many new O.D.s fall into the trap of ever increasing debt. Being accustomed to student loans, all too often the trend of borrowing continues after school with automobile loans, home loans and credit card debt. With such debt, they've sealed their fate, and many end up living beyond their salary and trapped in a job they can't afford to leave.

THE PROS AND CONS OF COMMERCIAL PRACTICE

No optometrist can argue that over the long term, private practice provides the greatest income growth potential. Private practices also offer a degree of stability that may be absent in a commercial setting, where practitioners are more of a commodity. This is primarily because commercial outlets always have a plentiful supply of new O.D.s willing to work for less than or the same amount as practitioners already on the payroll.

Yet, many recent grads turn to commercial optometry because they come out of school feeling that they don't know anything about running a business. Rather than taking a risk and attempting to establish a name for themselves, they prefer to ride on the coattails of a well-recognized corporate entity.

ADHERE TO A SIMPLE DEBT MANAGEMENT PLAN

There's still hope for a successful and rewarding career in optometry, but it requires solid financial planning. The key to debt management is to live on less than you make. It seems simple, but many don't do it.

Every dollar you earn needs to be budgeted. Then, sit down and list out all debts. Don't concentrate on the total sum, but arrange the debts from smallest to largest from every lending institution. This list should also encompass all your personal debt, including credit cards.

Attack the first debt on the list with as many extra dollars as you can find while paying only minimums on all other debts. As you pay off the first item, move down the list. Granted, this debt snowball may take many years to eliminate, but you'll be surprised how quickly it will proceed if you work diligently and consistently at it. Your progress will encourage you to continue.

I realize it's hard to see peers going on vacations and buying new cars while you sacrifice and save, but don't jeopardize the way you truly want to practice simply because it doesn't immediately pay as much as another opportunity. Keep the big picture in mind. It's so much more important to do what you enjoy because your patients will benefit from your enthusiasm. In the long run, you'll be glad you sacrificed early to gain financial security later. CLS

Dr. West lectures nationally and internationally. He is in private practice in Brentwood, Tenn.

Dr. Pullen worked in a commercial setting for over a year following optometry school. He is currently in private practice in Kingsport, Tenn., emphasizing primary care and contact lenses.