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The Importance of the Cost of Living

Cost of living is understood to be how much one spends per month on their living expenses. But I think it’s hard for many of my physician colleagues to have much perspective on this. The importance of the cost of living goes far beyond the monthly or annual dollar value.

If you’ve grown up in the US and lived in the US then you generally will understand a median household income to be somewhere in the $65,000 a year range. Or somewhere around $5,500 per month.

If you’re reading this as an attending chances are your cost of living is somewhere around $10,000 per month – easily. If I told you to imagine a cost of living of $2,000 per month in another country you likely would think of Mexico or Guatemala.

USA’s Cost of Living

In the cost of living calculation, we also have to factor in the stress of earning that income. The more income you need the harder you have to work for it. Well, for the most part.

There are a few countries like the Netherlands and Germany where your work isn’t necessarily harder for that higher cost of living but there aren’t a lot of places like that.

When you need $150,000 per year to earn a good living and the average household earns half of what you earn it’s easier to feel that you are perpetually close to losing your household.

In the US we earn more money often by taking on a lot more risk. And maybe we won’t work a lot harder physically for the money but we’ll definitely wear out our brains as physicians.

Lower Cost of Living Abroad

For those who haven’t had a chance to live abroad, you might imagine Tijuana when you think of Mexico. Or, even worse, some tourist destination where it’s all Canadians and Americans in white socks and flip flops.

More metropolitan cities in Mexico actually are quite different – a lot more advanced than one might think. But forget Mexico for a moment. Think of Eastern Europe, Spain, Portugal, or other such stable economies. Working here your salary won’t be impressive but it’ll be higher than average.

More importantly, your cost of living in these places will be low. The kind of low where you will never feel like you’re balancing your personal and financial life on the edge.

The reason for this might be that your income just isn’t that much higher than someone else’s. You’re getting by. And you’re able to enjoy things which aren’t tangible like good weather, good friends, and a strong social structure.

Living on $2,000 Per Month

Imagine if you could earn $2,000 per month in the US and live in Spain, France, Italy, Brazil, Peru, Chile, or Mexico.

Rent might cost you $1,000 per month for somewhere quite nice. And you would have another $1,000 to spend on food and travel and health insurance and transportation.

I can do a few telemedicine visits per week and earn that kind of money. Or just one healthcare consulting client every month would be more than enough to get you that kind of income.

So now you are working a balanced work lifestyle and you have time to develop other interests. Or, perhaps you work more and earn more. Those earnings then you’ll use to do something positive within your local community.

Digital Nomad Visas

Most countries are developing digital nomad visas. Spain is going to announce theirs this year. This means you can live in Spain and earn your US dollars.

While many countries will want people like myself to go live there and spend money there, my own home country will try to push back. Even with common tax treaties in place the US will not want its citizens living and spending money abroad.

So this is going to be an interesting story to follow over the next few years. We will see how it plays out.

Personal Cost of Living

To me, there are 2 different costs of living; the one where you live like your neighbors and your personal cost of living. What’s the difference? I can live in Portland, Oregon without a car, without A/C, and spend less than $2,000 per month. My personal cost of living is incredibly low.

But the cost of living in Portland is likely somewhere around $55,000 per year. You factor in expensive health insurance plans, a nice car, a decent home, travel, dining out, etc. It adds up.

When you go to other parts of the world it’s rare to see people living it up the way they do in the US. That’s been my personal experience and yours may vary.

Upcoming Inflation

We’re not talking about it because we are still busy dealing with the current pandemic but a massive wave of inflation is about to come. No worries, if you’re working and earning an income as a physician your income will keep up with any inflation.

But, hey, we’re not really worried about you, you have a good job and you’re a doctor, you’re always gonna be okay. The inflation however will have a ripple effect on those around you and the government will have to make concessions which will impact your current lifestyle negatively. That’s all I’ll say about it for now.

The way inflation will directly affect your lifestyle is by pushing up the cost of service and goods. Not only that, if you want to have anything done in a timely fashion you’ll have to spend a much higher premium.

The more you spend, as in, the more of a consumer your are in the economy the more you’ll feel this wave of inflation. The more fickle will be your household spending and financial situation.

Having a Way Out

Experimenting with an alternative lifestyle and an alternative spending plan to me is good practice. Now, if you’re a resident or medical student reading this you’ll just see the words of a jaded physician. You likely won’t believe that one day you might feel the same way about the practice of medicine.

And I hope you never do because the euphoria of the career is incredible. But, statistically, you will be in my shoes one day and preparing for it doesn’t hurt.

Learning to live on less whether you stay stateside or live abroad is great practice. And I promise you it’s harder than you think – it just takes practice which means time.

So one day you wake up and you just don’t want to do this medicine thing anymore – at least not full-time. You look at your baseline household cost of living and you realize you are far away from being able to get by on just 10 hours of work per week. I don’t want you to end up there.

Taking a 3-month sabbatical and going abroad and earning and living on less – it cleanses the soul, I’m telling ya!

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