Finance Basics,  Other Important Stuff

Its not the “toast”!

I love avocado toast. There, I’ve said it! More specifically, there is a “toast trailer” in South Mountain that sells the most amazing avocado toast. When the trailer is out on 24thstreet – weekends from October to May – that’s my Saturday breakfast treat. Six dollars for 3 pieces of toast and a home baked treat. According to one “expert,” not only is this a total waste of money, it’s the primary reason millennials are broke. Wait – really?

Yep, in May of 2017, Australian real estate magnate Tim Gurner, went on television and proclaimed the reason millennials couldn’t afford to own a home was that they wasted their money on “smashed avocado for $19 and four coffees at $4 each.” Never mind that avocado toast costs nothing close to $19 or that no one I know drinks 4 Starbucks a morning. What about stagnant wages, ballooning student debt and skyrocketing real estate prices? Nope, it the toast. If you think this sounds about as “out of touch” as Marie Antoinette’s famous “let them eat cake,” you’re not alone! 

The real cost of toast!

So I decided to calculate the real cost of 8 months of toast a year. Let’s assume I could have invested the $6 a week, 8 months a year and earned 6% in returns. In 10 years, I would have earned $622! Wow, now I totally get it. That $800,000 house I couldn’t afford in Scottsdale? If I had saved that $6 a week for 10 years, I totally could have afforded it! Now I know – and it’s all because of Tim Gurner’s sage advice. 

So if it’s not the toast……

How about DVM income?

So if It’s not the toast, why are millennials broke? More specifically, why are DVM millennials broke.Well for starters, let’s look at veterinary income. If we look at AVMA data, from 2000 to 2017 average DVM income appears to have increased from $82,272 to $108,773. That would represent an annual increase of about 1.9%; however, when we account for inflation, salaries are actually stagnant or falling. So the gains in salary really have left veterinarians essentially in the same or in a worse position then they were 17 years ago.  

Veterinary Student debt

Well if incomes haven’t changed, how about debt levels? Well in 2000 the average veterinarian graduated with ~ $50,000 in debt. By 2017, that number had ballooned to $167,534. That an annualized increase of 7.13%. Even more shocking is that 20% of graduating DVMs had debt of over $200,000! In 2000, a newly minted veterinarian could hope to be done with their loan in 10 years by paying $550 a month. Not an insignificant amount, but a manageable sacrifice. By 2017 a veterinarian with $200,000 would have to pay a shocking $2,230 a month to be done in 10 years. This leaves little choice but to select an income based plan. While the monthly payments might be manageable, the debt doesn’t go away for 20-25 years and then there’s the tax bomb. 

Why DVM salaries are stagnant

So it’s really not about the toast, it’s about income and debt. One is increasing while the other isn’t. So if this is the problem, why isn’t more being done about it? Because there is no easy fix. Practices are limited in how much they can pay their doctors and stay in business. It doesn’t help that there is an ever increasing number of graduating students helping keep starting salaries low. While there’s no doubt pet owners today are paying more for the care of their loved ones, much of the increased spending is on high tech “gee wiz” procedures like lithotripsy and laposcopic surgery. Sure, these procedures are expensive, but much of the cost is related to advanced equipment. Even if the doctor performing the procedure experiences an increased revenue, most DVMs reap little benefit because of the specialized nature of these treatments. 

The system is broken!

The sad truth is that at some point, the revenue derived from the practice of veterinary medicine will be insufficient to cover the debt generated attaining a DVM. When this happens, the pool of talented applicants to veterinary school will dry up and the system will be forced to change. That day may be sooner than we think. 

What can a DVM do?

In the interim, what can newly or soon to be minted DVMs do? Well, we should be careful about where we chose live. Where you live can be as if not more important than how much you make. We need to be strategic about our spending on homes and cars. And lastly, we need to budget ourselves. If we want to be able to buy a house, help send kids to school and retire we need a plan. That doesn’t mean that you shouldn’t splurge on avocado toast. If you work out regularly, you should have a gym membership. But income is finite.  Make a budget and stick to it.  

The PocketDVM – The #1 source of DVM personal finance news

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