In 2022 I obtained a mortgage after nearly 2 decades of being debt-free. Here is how the burden of a mortgage has affected my lifestyle.
The Downside of Debt
I own 2 properties that I bought in cash – Portland (2014) and Spain (2018).
Other than HOA dues and property taxes, these are relatively inexpensive properties for me to own and operate.
I put down 30% to buy a $350k property in California, leaving with a $1500 monthly payment. And now that’s all I think about because I have to make an income to cover this cost.
The main downside of debt is that it burdens you with a feeling of responsibility, with a sprinkle of fear.
Living Debt-Free
When I was debt free, I knew that any money I made was meant for me. So I could spend it on myself or my family.
Debt that doesn’t earn you an income saddles you with a sense of responsibility, of which we have plenty in medicine and in this highly structured world.
My day-to-day decisions focused on living a healthy and sustainable lifestyle. I focused on my mental health and personal growth to be an asset to myself and others around me.
With debt, I’m a little more preoccupied with meeting my financial obligations. It’s subtle, but I notice it when I make work decisions.
Paying off the Debt
From 2012 until 2016, I spent much time and effort paying off my debt. I used software like YNAB and became ultra-frugal. Quite exhausting when I think back to it.
To pay this debt off, I’ll have to get back to frugality, hard work, and spend the time and effort necessary to make it happen. Sounds damn exhausting.
Alternatively, I could cash out my investments, pay off this debt, and spend the next few decades rebuilding those investments.
Avoiding Debt When Work Isn’t Desirable
I like what I do, but not enough that I would do more of it. I have a healthy balance of cooking, rock climbing, socializing, reading, and work. Work is far down this list.
Maybe I would work if I had $150m in my bank, but not exactly the kind of work I’m doing right now.
Avoiding debt when the work isn’t desirable or if the work seems exhausting seems logical. Well, it’s a good lesson, and I hope it helps young physicians to make that decision when they face that fork in the road.
For anyone else reading this, if the debt seems overwhelming, there is nothing wrong with selling the house and just renting or buying something in cash.
It’s not a failure to go backward. It’s growth.
Options When Saddled with Debt
1. Sell it
Big debt is either a mortgage or a home. For some, it’s a business low, but since the business should be making money, it’s less of an issue.
A burdensome mortgage can be solved by selling the house. Yes, you’ll need to rent, but there is more price flexibility when renting than buying.
The key is not to view it as a loss or a failure.
2. Rent it
You can’t rent out your student loan debt, but you can rent the house out. Take the goodies out, and put it up for rent.
I successfully rented out my Portland condo on Airbnb, and the return on investment seems okay. But it’s not headache free, that’s for sure.
3. Pay it off
Cashing out investments to pay off a mortgage or hefty student loans can make sense if possible, especially if it gives you peace of mind.
I now appreciate how nice it was to be debt-free after taking on this $200k mortgage.
4. Walk Away
Whether it’s a car, a student loan, or a mortgage, you can always walk away.
When shit hits the fan, and you are totally overwhelmed, remember, you won’t go to jail and die or disintegrate if you walk away.
Yes, it’ll be a financial disaster that will haunt you for a few years afterward, but many of us will have some financial disaster in life, and we’ll all recover just fine.