Live Under Your Means

If you want to make progress on getting out of debt or saving for retirement, then you really should live below your means. The more I think about the deep student debt we’re in, the more I want to get out, like, yesterday.

The biggest mistake was maxing out our loans as students, and taking out additional loans the last year of medical school. Viewing that money as Monopoly money is one of my biggest financial regrets. But I can’t go back and borrow less.

I don’t feel like we’re living a lush life, but are we living below our means? With an estimated 7 years until our loans are paid off, I’m not sure we’re doing all we can. So I decided to dive into the details of our lifestyle (outside of insurance and investing, which is deliberately submaximal while we’re focused on getting out of debt).

Our Life During Residency

An average resident’s salary in 2018 is $55,300Not far from the average American’s income of $59,039That’s not that great when you consider they work about 60-80 hours/week (or more). Our residencies were 4 years.

Sadly, no one encouraged us to pay off student loans during residency. We put all of our loans in forbearance, meaning they accumulated compound interest for 4 years while we weren’t paying anything towards them. That was dumb.

During residency we lived in a low cost of living (COL) area. Our rent was $950 per month for the 4 years. Both of our cars were paid off and reliable – a Honda Civic and Volkswagen Jetta, each less than 10 years old.

In addition to the basic expenses (food, rent, gas), where did our money go? After our intern year we got a dog, and a dog walker. We went through extended phases of eating out weekly and I reliably bought 3-4 lattés a week. Grocery trips at Whole Foods were rare, maybe monthly. We did have an occasional dry cleaning bill, but rarely bought alcohol since it wasn’t readily available at the grocery store in the state where we trained. The last 2 years we paid someone to clean our house twice a month. When I purchased new clothes I went to Target.

We were healthy and rarely had medical bills. We didn’t have much choice in our health insurance through our programs, but I had a laparotomy (major abdominal surgery) for a large benign tumor in 2011 and gave birth to a child in 2013, and paid less than $2,000 between the two.

The largest luxury expense was the annual international trip we took for 3 years, more than $10,000 each trip. We have never regretted this. We took an additional 1-2 trips every year to visit family, who wasn’t close.

Without a doubt, the biggest cost savings was being childless for 3.5 of the 4 years.

Our Life Now

Our family has doubled in size since residency. We now have two cheerful daughters. As such, our house is twice the size and more than twice the cost at $2095 per month. We’ve proudly avoided the attraction of a $0 down physician loan and remain renters.

We also live in a higher COL area (our house is actually a steal here). But we’re closer to most of our families and vacation locally; therefore, saving on travel. The last time we flew was 2 years ago for my brother’s wedding, compared to at least twice a year during residency.

I have significantly cut down on my latté addiction, now indulging in less than one a week. We eat out 2-3 times per month. Conversely, trips to Whole Foods are pretty regular. When I do buy new clothes now, I favor companies with strong philanthropic efforts, which means more money.

By the end of residency our cars were requiring costly maintenance approaching their Kelly Blue Book value. We bought a used luxury car shortly after residency, which we paid off the 5 year loan in 3 years. Our other car, an electric car, is leased, and there’s just over a year left on the lease. As financially stupid as it was to lease a car, it’s relatively cheap (~$300/mo), fun to drive and brings a smile to everyone’s face (except the dog, who easily gets car sick).

Just as the biggest cost savings in residency was being childless, the biggest expense now is two daughters. Now, as a family of 4 and less comprehensive medical insurance, medical bills have gone up. In the first six months of 2018, we have spent over $1,500 on medical bills. That does not include over $4,000 we spend the second half of 2017 for specialist visits and ear tubes for our youngest. Childcare is $940 every two weeks, but because it’s the hospital child center, their amazing hours (6:30am – 6:00pm) allow us both to continue to work as physicians. Not wanting to deprive them, we also participate in seasonal soccer, ballet and swimming, although each is about $60/month. I’ve cut back on my book purchases now that we are walking distance from the library. We rarely buy toys seeing that boxes and blank paper forms from work are the most entertaining.

What Are We Doing Right?

This is right.

Just over a year and a half ago we had $640,000 in debt. Now we have “only” $511,000. So we must be doing something right.

Last year we were less dedicated to paying off loans. We rarely looked at our spending in depth, didn’t have monthly financial meetings and were making two car payments. Still, 25% of our take home pay (after taxes, 403(b) contributions and childcare) went towards loans. 

Hopefully, this year we are putting closer to 30-40% towards loans. That’s an extra $4,000+ per month that could be spending traveling or dining or on a bigger home. There are corners we could cut to redirect a few hundred dollars towards loans, but money does buy happiness to an extent. And we’ve found our balance.

We think we’re living below our means the best we can. On the contrary, we feel like we’re living pretty luxuriously.

We rent our home, we only have one car payment and will buy our next car in cash next year. Unlike residency, we rarely eat out or travel. Lattés are a luxury enjoyed on average once a week. We pay off our credit cards in full every month (always have). Gifts and extracurriculars for the girls are minimal.

What’s Next?

We’re not quite willing to live on “beans and rice, rice and beans” like Dave Ramsey suggests in order to pay off our student debt as fast as humanly possible. Our rent and childcare alone is $49,580 annually, nearly the average American income. Our utilities are regularly less than $400/month and we don’t have cable.

When Mr. PW wrote our investment policy statement in 2016, the goal was to have all student debt paid off by December 2021. That’s more than doubling our monthly payments! What will we do differently to make that happen?

Mr. PW is aggressively seeking moonlighting (extra work for extra pay) opportunities, but trying to balance that with family time. I’ve started consulting on the side for a few hundred dollars a month. It’s not very lucrative, but it’s also not much work. Next year I’m going to increase my time working. Best of all, both girls will be in childcare for just one more year, then the eldest starts public school!

What will I do differently to commit to paying off loans?

Our goal is to put >$10,000/mo towards loans. Even with that it will take 51 months to pay them off, actually longer with interest. At this point there’s not a lot more fat to cut in our budget, so most of the rest of our increased loan payoff will come from additional income that we hope to add in the near future. 


How do you live below your means? What are you willing to scale back so you can invest more? Share your stories below.

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