Supercharge Your Debt Reduction by Changing Your Financial Narrative

Which kind of statements do you use more frequently?   “I live a charmed life. Things always work out for me.” OR  “I can never catch a break. Things are never easy for me.

The stories we tell ourselves about money interplay with our sense of personal and social identity and can have a profound effect on our financial lives.    As you transition from being a “poor resident physician”  to “rich doctor”  the financial narrative you tell yourself can change.   This change in narrative sets the stage for financial mistakes that will follow you for years if not identified and corrected.  You can supercharge your debt reduction by changing your financial narrative around a well-planned goal.

Identify Your Financial Narrative

Perhaps you believe that money is power and affords you the opportunity to influence the world around you. That story will affect your financial behavior. Maybe instead you think that money represents the opportunity for fun, adventure.  That, too, will drive your financial decisions.

On the other hand, you feel that money is a source of security, you may derive peace of mind from holding onto as much as possible or live in fear of losing even a small amount. If your story involves loss or hardship, you may chastise yourself for financial mistakes made in the past.

Whatever the story you hold in your mind about money, it is important to examine it carefully and ask yourself some questions about the source and results of that narrative.

The simple act of writing out your financial narrative can open the door for great personal insight and may even illuminate areas where you hope to make some change

Prompts to Think About Your Personal Financial Narrative

These following questions can get you started thinking about the personal narratives that drive your decisions.

  • What role has money played in my life thus far?
  • If money were a character in my life, would it be a friend or an enemy?
  • Was money discussed openly in your family growing up?  How did your parents feel about money?
  • When you consider your current financial circumstances, what emotions surface most often?
  • Do you have any financial fears? Why are these scenarios particularly frightening to you?

Once you have identified your financial narrative you have a choice. You can continue to believe and be driven by these narratives, or you can work to change them into healthier, more productive mindsets.

Some of our financial stories may be serving us quite well, and there is no need to fix what is not broken. Often we uncover a belief or two that we would like to change.  Some of us have more changing to do than others.

You have more than one narrative running

Chances are you haven’t given your narrative much thought.  For examples, most Americans think nothing of having a car payment.  Everyone we know has car payments,  Who can afford to pay $40,000-60,000 in cash for a new Suburban to get the kids to soccer practice.   The typical car narrative is that a well respected professional physician drives a nice clean car commensurate with his salary.   As a professional,  I don’t want to be seen in the doctors parking lot driving a beater car.

Your other narrative may be that you love having people over and hosting parties.  This house has an open kitchen, so the flow is better even though it costs $100,000 more than what we currently own.  Our parents live out of town, and we needed that extra bedroom and bath for when they come to visit.  We are not paying for private schools, so we needed to be in the best school district.  These are all narratives that will lead us to buy more house than we need.

You can see that these narratives begin to stack up surrounding all aspects of our lives.  Without conscious thought,  we can quickly end up in a financial wasteland of a middle age looking at another 25 years of work before we can afford to retire.

Someone else may be driving the narrative

You may be making financial and career decisions based on a limited interpretation of your parents’ wishes.  Your gratitude for their support has become twisted into feelings of obligation. Your decisions are not for your own good but for the good of what your family expects of you.

Breaking deep-seated feelings of obligation is a challenging narrative to change, but it is important for many if they are to get out of 30 years of debt and working for others.

It is OK for your narrative to change

As I wrote about earlier this year, I think poor people ought to drive cheap cars but I’m okay with rich people driving whatever they want. In this case, a rich person is someone who is on track to meet their savings goals and has the cash to pay for the car. As discussed previously, my goal isn’t to die with the biggest possible stash. Thanks to investing, I fully intend to spend more money than I ever earn during my life. I deferred spending as a resident and young attending so that I could spend MORE MONEY later, so long as it was spent on something that increased happiness

White Coat Investor

In this case,  the white coat investor’s personal narrative has changed from the indebted young physician who only buys beater cars to a financially sound physician who can buy his cars brand new with cash.

When you think back on your financial history—the circumstances, people, and events you have been exposed to—is there an alternate interpretation of the same events that might lead you to draw a different conclusion about the role of money is playing in your life.   As physicians, we can often be hypercritical of our mistakes.  There are times the narrative makes sense and doesn’t need to change.

Find the Positive Counter Example to Your Debt

While carrying a high debt load currently is not extremely helpful and is an emotional as well as a financial burden.  There is a good chance that there are some positive reasons you took on this debt when you started school.

I Financed My Way out of a Blue Collar Job

The law of diminishing returns is alive and well when it comes to financing your education.  At some point, taking on more student loans is not worth the investment.  For the vast majority of us, it still beats the alternative.  Many first generation professionals don’t have the bank of mom and dad to lean on when making a generational leap out of a blue collar career to a white collar career.

The alternative to this would have been not financing my education and ending up with no higher education and different network.  What opportunities did getting an education open for you?  Do you have the pride of accomplishment,  a different network of professionals that comes with a different career?    Is your primary job worry sitting too much during the day instead of physically wearing out on the job and no longer being able to work?

Having hundreds of thousands of dollars in medical school loans is not ideal, but there are professional and societal benefits to becoming a physician.  Not everyone who goes to business school becomes Warren Buffett or a hedge fund superstar.  There are plenty of MBA’s walking around our hospital stuck in middle management.  If you ever wonder what their day looks like,  watch Office Space

How Do I use this Knowledge to Supercharge my Debt Reduction?

Start changing your narrative by giving yourself permission to move on from your old narratives.  Acknowledge them but realize if you want to achieve some things that you have been unable to reach,  you will have to do some things that you have not been willing to do.

Just Start

Acknowledge the old narrative.   Boy, that Porche Cyanne sure was a great car.   You sure worked a bunch of moonlighting shifts to pay for it.   It was fun to drive, and it looked great, but right now,  you still have $200,000 in student loans, and you are already five years out from residency.   Those loans would be a lot easier to pay back without a $1200/month car note.    Not everyone is going to have such a glaringly obvious change they can make to their narrative.   Some of the changes may be small at first, but they add up over time.  Pete does a great job explaining this concept here.

Do you want to change?

For this to work,  you have to want to change and to be able to move on from that old narrative.  You need to decide why that story is important to you.   Is having the house where everyone hangs out important because you never had the opportunity when you were younger?    Does the luxury car represent the level of success you aspired to when you were younger?  When we have identified the reason,  we can determine if it is more important than our current goals.     It’s the same thing about saving/earning money.  Just wanting more money isn’t going to help you make the difficult choices and do the extra work.   Making that extra money has to strike an emotional cord for us to commit more of our limited hours to obtaining it.

Where we are.

For us,  the emotional cord was the burden that being over $1,000,000 in debt placed on our financial flexibility.   To manage that degree of debt; it cut into our spontaneity and flexibility in all phases of our life.    If an opportunity were to arise,  we can’t take advantage because every dollar is allocated each month.

Debt can contribute to burnout.   I have to be careful not to fall into the trap of feeling like I have to work, work, work to repay my debts.   The tension of always having to work can contribute to burnout, a growing problem in healthcare.  For many, eliminating your debt represents gaining your freedom again and can permeate all aspects of your life.

Tell a better financial narrative to get to a better place

Seven months ago, we had to change.  We were telling ourselves that we were a single income family living in a competitive metropolitan area neighborhood.  We were frighteningly close to becoming overextended financially.

In reality, we are well-educated professionals with a respectable, rewarding career living in a home that we could not have dreamed of 10 years ago.  We are also able to provide our children the opportunity to have a head start at a similar stage in life.  However, we don’t spend time or money on things that are not moving us toward our goal of being debt free in 10 years or less.

The realities of the debt are still there, and lifestyle changes have been made to accept them, but our narrative has changed.

Use your new narrative to focus on what is important to you.

Our new narrative has changed how we spend our time and money.   We can keep the things that remain important to us and eliminate some of the less essential items to create some breathing room in our budget.

We traded current financial freedom today to be in a safe neighborhood, close to work and family.

What stories do you tell about yourself and your life?

We all have a narrative that we tell ourselves and our purchases fill that narrative.  As a physician,  you will have the opportunity to live out that narrative.   You just don’t have to start living it immediately right out of residency.   Take it from me,  give yourself just a couple of years to get your feet under you.  Get your student loan debt under control.   Where you choose to live has implications far beyond just the cost of the house.

When you find yourself far in debt, you have to stop, evaluate your options, make a plan and then execute with persistence.  This type of work is a marathon, not a sprint.

What do you think?    What is your financial narrative?   Do you see yourself in a positive or a negative light?   Are you overly critical of your past mistakes and unable to move on?



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