As before, I continue to budget using YNAB and my expenses for May 2018 have come out to $2,208. I’m a little more cautious with my spending after my medical board investigation drama.
I have also started contributing to my investments again which I’ll discuss in future posts. As long as I continue to earn money doing telemedicine and doing consulting work, I prefer to keep some of this income rather than spend it all.
Total Spending – $2,208
$2k/month is a sustainable spending level for me. I ask myself how much I would need to invest in order to earn this level of income and decide if that’s the kind of portfolio I’m comfortable building.
Another way to frame it would be to ask myself what kind of gig I could do that I love which would earn me this kind of income. My consulting work is really enjoyable but doesn’t earn this kinda dough. My work at the community college could earn this money but I’m not sure I’d enjoy it once I bump up my teaching hours.
Passive Income: Securities
To earn $2,200 per month from an investment portfolio of securities I would need to have $700,000 invested in index funds. Assuming around 2% from dividends and another 2% from selling appreciated funds is a safe estimate.
Depending on how much wiggle room I have with this level of spending, I could get away with less. For example, if the markets are down and I can get by spending only $1,500 then I don’t need as much money invested.
Passive Income: Real Estate
With a capitalization (cap) rates of 4-5%, rental income properties might be another good option.
A rental income unit worth $600k could earn me enough rental income to cover this spending. It’s a little less passive than securities but for the right person it might generate adequate investment income.
Passive Income: Peer-to-Peer Lending
When I invested in P2P lending back in the day, I grossed an annual rate of return of 6.5%.
I would have continued but my returns were decreasing as a few notes started defaulting. At this rate I would need only $500k invested to earn my $2,200/month from P2P lending.
P2P lending is expanding as lenders can now lend their money to real estate investors who are looking for lower percentage notes for their investments.
Passive Income: CD’s
Current CD’s aren’t even keeping up with inflation, last time I checked. But on a long enough time horizon, CD’s tend to keep up with inflation.
A CD which earns 2.8% annually could produce a passive income of $2,200/month with around $1M invested. Probably the most inefficient of most investment options currently, depending on your risk profile.
Work/Business Expenses – $630
My legal fees were minimal, $480 for my lawyer’s time to deal with the medical board investigation. We had to sign their Stipulated Order and clarify a few issues.
The rest was spent on various subscriptions and services I use for my blog and other personal websites.
One way I look at this spending is that if I wasn’t working then I wouldn’t have these expenses. So if my income was purely passive from investment income then my spending would drop.
Groceries – $385
Spending nearly $400/month on groceries is quite a lot of money. What can I say, I pamper myself. Hopefully this spending will be less in Spain.
It’s always the prepared items that set me back a lot. Hummus, vegan sausages, condiments, and bread.
Housing – $172
I haven’t had any major repairs on my condo. The utilities are cheap which leaves me with only HOA and property taxes.
The main expense is $172/month for my HOA dues. I don’t include property taxes in my monthly expense reports because I pay it once a year. It comes out to around $2,000/year.
My hot water valve stopped working this month but I managed to fix it myself, saving on plumber expenses.
To have a take-home of $2,200/month from telemedicine I would need to earn around $2,500/month of income. This is assuming I set nothing aside.
I would need to see 110 patients for the month at $23/patient. Most telemedicine companies pay that much per patient visit.
Or I could answer 166 JustAnswer questions. The average question earns me a little over $15.
I haven’t started my Nexus chart reviews. At $75/chart I would need to do 33 chart reviews per month.
Value of Budgeting
I wrote in a recent post that I haven’t budgeted much over the past 1-2 years. It is so much easier to not budget and spend freely whenever the urge arises.
The downside is that after a while you start feeling a little fragile. You worry that you’ll lose your budgeting skills which would mean having to increase your investments and savings in order to cover the excess. This is the lifestyle creep that people refer to.
As always, as soon as I start budgeting I fall right back into the groove. It doesn’t feel like I’m sacrificing anything or losing out on anything. It’s like brushing my teeth, I don’t want to deal with the consequences of not doing it.
Oversaving For Retirement
I am not sure if there is a way to never having to budget. Definitely not an option for me because I’m a greedy little fucker. The more money I have, the more I spend.
My friend V. can’t fathom spending even $3k/month, she wouldn’t know what to spend on. Not me. Give me $100k/month and I could blow through it in a week.
One way to decrease the amount of budgeting you have to do is to oversave for retirement. Even if your basic household spending is $3k, invest and save enough to allow for $6k, etc.
The problem is that our tax code is progressive. And seeing more patients means more risk, also rising exponentially.
Aiming for $2M instead of $1M requires quite a bit more time and quite a bit more effort. I would rather spend my time on this earth doing things I enjoy rather than working full-time doing medicine.