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Most medical professionals graduate from school with a high debt-to-income ratio.
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After paying off her student loans, physician assistant Kristin Burton started helping colleagues with money.
She says most medical professionals aren’t taught three important financial concepts.
The biggest one is debt-to-income ratio, the amount of debt you have compared to your income.
After finishing grad school, 30-year-old physician assistant Kristin Burton was shocked to learn that she owed a total of $161,000 in student loans.
“The very first step for me was to cry a little bit,” Burton tells Insider. “And then I realized I needed to make a plan.” Burton picked up as many extra shifts as possible while living on her husband’s salary. She used 100% of her six-figure PA income to pay off her student loans aggressively in just 16 months, according to records reviewed by Insider.
During the pandemic, she continued picking up extra shifts and went on to pay off her mortgage and become completely debt-free. Now Burton coaches her colleagues on personal finance through her business, Strive With Kristin, where over 1,000 medical professionals have enrolled in her courses and purchased her ebooks.
Burton says that most medical professionals aren’t taught three basic personal finance concepts that could drastically change their financial outlook after graduating from college.
1. Debt-to-income ratio
Debt-to-income ratio is a metric used by many lenders to compare the debts you have to your income. A good debt-to-income ratio is 36% or lower, however, Burton says most medical professionals graduate from many years of school with a debt-to-income-ratio of 300% to 400%.
“The No. 1 issue is massive student loan debt bigger than most people’s mortgage payments,” Burton says. “If you look at the average student loan debt for a PA, it’s above $100,000 just for PA school, and that doesn’t even count undergrad.”
2. Compound interest
Compound interest accumulates when previously earned interest is added to the principal balance that you initially borrowed or invested. It can work against you in the context of debt, but it can work in your favor if you’re investing money.
Burton says, “Because a lot of us are in school until we’re at least 30, we miss our prime investing years where other people can be investing even much smaller amounts of money and see huge progress.”
Other professionals who enter the workforce fresh out of college at 21 or 22 have the advantage of time in the market. In the eight or nine years that other professionals stash away 401(k) contributions or put money into brokerage accounts, their money grows at a higher rate due to compound interest. Burton adds, “There’s a huge benefit to be able to start investing at 22 or 18, and a lot of us really miss out on that.”
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3. Lifestyle creep
Lifestyle creep occurs when you start splurging on more luxury items as you earn more money, getting used to a higher standard of living in the process. Burton says that medical professionals new to the workforce try to “keep up with the Joneses” and splurge on luxury items they can’t afford.
“In the world of medicine, there tends to be a culture that your lifestyle should look a certain way,” Burton explains. “For example, a new PA who probably has a negative multi-six-figure net worth will feel like they need to have the same car, the same house, all the same stuff as a PA who has been earning six figures for the last 10 years.”
This article was originally published in April 2022.