2020 is now behind us. It was a crazy year for us all. Obviously we have all been affected by the Covid-19 Pandemic. Our health and the health of our loved ones have been affected. Jobs, business, schooling for our kids and so many more things have been flipped upside down. Some of us have been more affected than others. Paying off debt was harder this year.
There have been many challenges in all of our lives including in ours at Debt Free DDS. One of the major thing it affected was this blog. With a business needing a lot of attention, and kids at home for school there were too many things to take care of family wise and business wise to give this blog the attention it needs. However, looking back I can also see all of the blessings and positives that came out of this year. In this post, I will only discuss the affect this pandemic had on my debt situation. I hope to be able to get back to blogging and helping dentists and anyone destroy their debt in 2021.
Goals for 2020 from 2019 Year in Review
Check out my 2019 review here. In it I had a couple of main goals for my debt for 2020. Little did I know that Corona Virus would rock our world.
Goal #1
Goal #1 was to pay more than about $7,000 in principal on my mortgage. That was a very easy to attain goal I thought. I had been so focused on other debt that I had only paid the minimum on my mortgage. Since it was a new mortgage most of my payment was interest.
I’m glad to report that I did achieve that goal. I was fortunate enough to be able to pay my mortgage every month throughout the pandemic. I can thank my Emergency Fund for that. However, I didn’t pay any extra towards principal again this year. For two reasons, one because of the pandemic, and also because I was more focused on my second goal which I will discuss next.
I did pay almost double towards principle on my mortgage than I did last year. Part of that was because I refinanced to a 15 year loan with a lower interest rate. I do recommend that you have a 15 year mortgage instead of a 30 year. If you can’t make the payment on your house with a 15 year mortgage, then you probably have too much house.
Goal #2
Goal #2 was to pay off my business (dental practice) loan. I knew I could pay it off barring some major unforeseen event.
Well, we had that major unforeseen event. Not many of us saw the Covid-19 pandemic coming. At least not to the extent that it came. We were only seeing emergency patients for a while. We had and still have to limit our numbers and capacity. Lot’s of restrictions were and still are in place. Not to mention many patients didn’t (and still don’t) feel comfortable coming to the dentist. There were some government grants and loans that helped our office weather the storm. However, I also live and work in an area where dental care is very needed.
I had a 6 month emergency savings that helped us a lot. We tightened the purse strings. We couldn’t go out to eat or travel. We have slush funds that we save up for a lot of travel and house projects. We didn’t do those. In other words we cut our spending way way down, used a lot of savings, and still hammered the debt as much as we could. I’m proud to say I paid off my practice loan.
This means that the only debt I have left in my life is my home. I paid off my student loan in 2018, my practice loan in 2020, and I don’t have car loans or any other consumer debt. I never plan on getting into any more debt again unless more unforeseen pandemics or problems happen. However, I hope with a high savings rate and emergency fund that I can continue to weather the storms that life will inevitably provide.
Goals for 2021
I didn’t by any means become rich in 2020. I didn’t have the income to both pay off debt and invest as much as I wanted this year. I am just grateful that I didn’t get poor either. I am grateful for the emergency fund I had and also the discipline to heavily cut spending and continue to pay debt as much as possible. I hope 2021 is better for us all in many ways.
Goal #1
Finally beginning to pay a little more to principle than the minimum mortgage payment this year is a big goal I have. I do have a 15 year mortgage with 14 years left but I don’t want it to take me the whole 14 years. I am not going to aggressively pay it off like I did my student loans and business loans. But I do want to throw some extra money at it every month if possible to pay it down sooner than 14 years. I think everyone’s goal should be to try and pay off a mortgage in a decade. However 15 years is much better than 30 or longer.
Goal #2
Stop worrying so much about debt and finally hit the investing hard. Being debt free is a great goal and all, but if you have no debt and no investments then you are still poor. If the goal is to be able to retire be financially independent some day, then you have to save a lot of money. Not only do you have to save a lot of money, but you have to have that money grow a lot. You have it grow by investing it reasonably in stocks, bonds, and/or real estate. Your money simply won’t grown enough to outpace inflation enough to comfortably retire without investing it and taking some risk.
So I will not say my goal this year is to become completely debt free. That would require me to pay off my mortgage. That will likely take me several more years to do if I wan’t to see my investments make any sort of a significant jump. So my main goal is to save more money in stock and bond mutual funds in a taxable account. Why a taxable account? I already max out my 401k and do a Back Door Roth IRA. This however isn’t enough to save enough to become financially independent.
Really the only other two good and proven options is to invest in the same indexed stock and bond mutual funds that I do in my 401k, in a taxable brokerage account, and also real estate. Right now all of my real estate holdings are just in REIT index funds.
Here’s to a good 2021
I realize you may still struggle in your business in 2021 because of Covid 19. I hope you are able to continue slashing your debt away. I truly believe as we become debt free we become better dentists (or better at any job), happier, and more able to be philanthropic. All of us including our country would be better off without debt.
Even if you can’t pay down a lot of debt this year, at least try not to get into more debt. Be careful what you take out loans for. Be willing to cut spending and avoid lifestyle inflation or even have lifestyle deflation if needed. Also if you are in need of some financial education I highly recommend you read these books and even take a look at taking this course. If you have any questions I am here to help. Just contact me here.
Debt Free DDS
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*Nothing on my website is professional or legal advice. I am only sharing information that I have learned and it may or may not be accurate. I am not liable for any problems you may have by following this advice. Please do further research and get professional and/or legal advice about any of these topics. This post likely contains affiliate links. This site could be paid for clicks or purchases made through these links.
