Sometime around 5/2013 I realized that I couldn’t maintain my level of spending. I was in the process of buying a new condo after having sold my first condo just the month before. This unit was a little under $500k with an HOA if a little 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 auto lease payments 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. In total I was fluctuating between $8,500-9,000/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 Mr Money Mustache 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 wish list. 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 and actually started making money on it. I had my 1971 Ford Maverick which I basically leased to my friend’s shop… didn’t make any money on it but they maintained it for me. 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). Anywho, 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 really 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. 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 the need of a car as backup, take public transportation and have beer for less than a paper nickel!! 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, no cell phone bill, no credit card bills, no cable TV, $30/mo for home internet and only a $70/mo gym expense. I still have my student loan payments but I’m a touch under $2,000/mo. I was able to move here with very little money. I drove my Smart Car up here with all my belongings (including my folding bike) 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.
If you are interested in cutting back on your expenses consider the following:
- 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