Sometime around 5/2013 I realized that I couldn’t maintain my level of spending. I was in the process of buying a penthouse condo after having sold my first condo just the month before.
This unit was $500k with an HOA over $500/mo.
I still had a lot of debt in forms of credit cards and yes, even loans against my poor little 401(k). Crawl forward a few months and I was the proud owner of this condo with monthly payments of $3,500/mo for the next 30 years.
I still had a car lease payment of about $300/mo including insurance. I was making above minimum payments on my $45k of credit cards, had about $130k of student loans which came out to about $645/mo of payments (while the interest was still accumulating).
I was financially helping out mommy dearest, about $1,500/mo. I was spending a good amount a month rebuilding my 1971 Ford Maverick and racing it.
Clothes shopping was a little under $1,500/mo.
Cell phones (x2) and super-duper fast internet along with cable TV was another $330/mo.
Riches to Rags
My monthly expenses were fluctuating between $11,000-$13,000/mo. I had perhaps $35,000 in my 401(k) at this time. I think I had a net worth of -$150,000.
Think about it, I was a physician making $200k+ and I was in more debt than when I was 19 years old working at Petco!
I was in the shower one morning and realized that if I continued on this path I was just gonna be a paycheck slave. I knew I was making too much money to have to continue working forever and I knew my expenses were out of control.
I started coming up with a plan right away, I got a hold of a few good personal finance books, stumbled onto the YNAB forum website and read a lot of other articles online about how people downsized.
I’ll get into the details of all that later. I started formulating this with the ex-wifey and I think she bought into it for a micro-second but quickly decided it was too radical for her.
My goal was to pay off the car to get out from under the lease, then sell the car, downgrade to a used car and still only rely on biking as my main form of transportation.
I decided I would sell the condo and just rent.
I would no longer buy anything that I didn’t “need”. Things I “wanted” would go on a wishlist.
By 8/2013 I accomplished almost everything.
I bought a beater Honda CRX and instead of selling my other 2 cars I decided to make money on them. I had a Smart Car which I advertised on relayrides.com (now turo.com) and made good money on it.
I stopped spending on my muscle car.
I found a cheap apartment for $825/mo, 210 sqft and within 10 miles of my work, so it was still within biking distance. I bought a few pieces of furniture (in hindsight I didn’t need them).
A Sustainable Budget in Portland
I pared everything down to about $4,000/mo. I was making chunky payments towards my debt and I was putting away as much as I could by maxing out anything that would lower my taxes.
I couldn’t get below this $4k/mo expense level. I had $600/mo of student loan payments, my $825/mo of rent, entertainment and food expenses and utilities, internet, cell phone bills.
I knew that San Diego was a high cost of living area even on a physician’ salary. Luck, fortune, fate… whatever you call it came my way. I found a similar urgent care position in Portland, Oregon with the same company.
I visited the city and realized right away that I could live closer to work, easily bike without needing a car, take public transportation and have beer for less than $5!!
After some back and forth to negotiate my contract (who says you can’t negotiate with large medical groups?) everything was set.
I’m now living in Portland without a car, renting a place for about $860/mo. This move broke my path on riches to rags.
- no cell phone bill
- no credit card bills
- no cable TV
- $30/mo for home internet
- $70/mo gym expense
I still have my student loan payments but my monthly expenses now are $2,000/mo.
I was able to move here with very little money. I drove my Smart Car up here with all my belongings packed inside that little beast. I was going to sell the Smart Car here but my mom needed a car so I donated it to moms… because she rocks!
I bought a twin mattress and bed from IKEA, got a free chair from an awesome neighbor and even got a free TV which I really don’t use.
Strategize A Budget
If you are interested in cutting back on your expenses consider the following changes while still enjoying your physician’s salary:
- try living with the bare necessities for a year and see how you feel
- if you have an expensive hobby get rid of it, replace it with something cheaper
- sell your house and rent
- send every dollar you earn towards your debt and keep enough for your basic expenses
- consider moving somewhere where you can live cheaper
Retire, Be Financially Independent
Update: It’s now 2017 and I’ve retired from medicine with my accumulated riches. I work here and there only to keep a foot in the door as I pursue my other passions.
I am establishing a second residency in another country and I’m making all sorts of new friends and building an awesome network of people with a similar mindset.