Tweet
Periodically, I've made mention of a feature article that was written years ago about me and my family and our frugal lifestyle. It was published in a national physician financial magazine. I mentioned it again in this thread: http://www.savingadvice.com/forums/p...ng-habits.html and a couple of people said they'd like to read it. I've never shared it before but it has been 10 years and I figure it's time. I just removed our last name and a couple of other identifying details.
What prompted them to write this article was a letter I had written to the editor a few months earlier. They did a profile of another doctor and his wife where they reviewed their finances, listed their assets, liabilities, and expenses, and made suggestions. MONEY magazine does the same kind of thing every month. I wrote and said that it was blatantly clear why they were having financial difficulties. Their spending was out of control, living beyond their means and not adequately saving. I went on to say that my wife and I were almost 10 years younger and earned a bit less but were in far better shape due to how we choose to live, spend, and save. The editors were so impressed that they contacted me about doing this article. So here it is:
How this young doctor keeps debt at bay
Publish Date: MAR 05,2004
This 39-year-old physician has school debt, a house, and a family—yet he's squirreled away more than $200,000.
Family physician Steven G. is a happy camper.
He's 39, he's paid off most of his medical school debt, and his savings are growing. He's on track to have college funds and retirement savings ready when he needs them—and that's on a salary of about $105,000.
No, you won't find the Gs shopping at Neiman Marcus. "Some doctors drive fancier cars or live in bigger houses," says G. "We live below our means. But we don't feel deprived. We enjoy today, but we prepare for tomorrow."
G has come a long way. He graduated medical school in 1990 with about $102,000 in medical school debt. When he married two years later, the newlyweds' joint assets totaled about $6,000. Now they're up to about $200,000, not including their house, cars, or collectibles.
G, who started practicing in 1993, is an employee in a two-doctor urban office. He and wife, 40, a homemaker, and daughter, 8, live in a three-bedroom colonial in NJ.
Other than a $10,000 gift from G's mother toward their down payment, Steve and M have built their own stash. And G predicts he'll be set for a comfortable retirement around age 62, after paying his daughter's college education.
Determined to wipe out med school debt
G vowed to wipe out his debts early on. In 1994, after he'd been in practice for a year, his Health Education Assistance Loans totaled about $62,000. That year, he started making extra principal payments (an additional $450 a month on top of the $225 due). Then, in 1999, he took out a home equity loan of $28,000 to pay off his car and part of his student loans. Those HEAL loans are down to about $11,000 now. The home equity loan has a $25,700 balance and 15 years left. "Once the HEAL loans are paid off, I'll have a chunk of money to put toward the home equity loan," he says. "I'll pay off all my debt way ahead of schedule."
G also began saving early. "We started putting $50 a month via automatic deposit into our first mutual fund in 1992, and increased that amount as my income rose," he says. The account is now worth about $22,000. The Gs have since added other funds and investment accounts, IRAs, and a 529 plan. Currently, 13 percent of G's gross pay goes toward savings and investments. Some large financial goals are looming, and the Gs aim to be prepared. "Our daughter will have a Bat Mitzvah in about five years, which we expect will cost about $20,000," says G. "Five years later, she'll head for college."
Rather than take a loan or charge the expenses, G plans to save for both the Bat Mitzvah and college. "The 529 plan we started last July now has about $3,000," he says. "Once my HEAL loans are paid off, I'll redirect some of that money into the 529. I expect to have about $75,000 by the time she starts college."
The Gs do use charge cards, but refuse to carry a balance. That keeps them from spending beyond their means, and from throwing away money on interest charges. "Credit cards can be the bane of existence for many people," he says. "We can't see spending first and then paying off; we save first, and then pay for what we want."
Despite their frugality, the Gs don't neglect charitable giving. "We donate money and volunteer our time and services to our synagogue, and support our local public television station and my undergraduate college," he says. They also donate old clothes, toys, books, and household items to Purple Heart Veterans, Goodwill, and other causes.
Taking frugality as a way of life
What's G's secret? Attitude.
"We are not into status items, and we're not upgrade happy; once we buy something we stay with it," he says. "But we don't feel like we're sacrificing. M and I enjoy our lifestyle."
The Gs will buy top quality items that are important to them. "We both love to cook, so we have Calphalon pots and pans, and KitchenAid appliances," he says. "We also have an extensive collection of Walt Disney memorabilia, and have spent thousands of dollars on it over the years. They're obviously not necessities. For things we don't consider a big deal, we buy something functional," he adds.
Take cars, for instance. The Gs own two that they bought used: a 1998 Toyota Camry LE and a 2000 Toyota Sienna LE minivan. "The Camry was a dealer demo, and had 11,000 miles on it when we bought it," he said. "I plan to keep it for another five to seven years." The minivan was two years old when they bought it last year.
"Our living room has had the same old furniture and IKEA bookshelves for the past 10 years, interspersed with some new pieces," he says. "Our house is nice, but it's not a mansion." The Gs intend to stay in their current home, although they may remodel or add on to create more space.
Finding bargains and getting the best prices also help the Gs' saving campaign. "We shop carefully," he says. "We buy some food items at Target because they're cheaper than at the supermarket. We'll pick up things at yard sales or thrift shops. Especially when my daughter was young. Why pay full price for overalls that she'll wear for three months, when you can get them for $1 at a thrift shop?"
The Gs take out novels from the library rather than buy them at bookstores, although they purchase reference books new. The family usually eats at home. "We prepare most meals from scratch. It's healthier and cheaper than dining out." And the Gs don't pay for any household help.
Vacations also reflect the Gs' stretch-your-dollar philosophy. They spend at least one week a year in Disney World, "but we stay at a $39-a-night motel two miles from the park, rather than on-site, where it could cost several times as much," he says. This year, they spent another week in Massachusetts. "We stayed at a Marriott using Rewards Points earned on our charge card."
But they also splurged. "One weekend last year, for our anniversary, we stayed at a luxury hotel in New York, ate at fancy restaurants, and went to a Broadway show," says G.
Steve and M have a crucial advantage: They have similar attitudes toward saving. "There's no way we could have accomplished what we did if one of us was a spender and the other a saver," he says. "We can't think of a single instance where either one of us wanted to blow money on something ridiculous and had to be talked out of it."
No financial advisers need apply
The Gs don't use a financial adviser. "We got a financial analysis done twice—in 1996 and in 2001—by our insurance broker," says G. "The most recent one showed a very small projected shortfall for our anticipated retirement needs. But we identified the factors that will correct that gap in the near future. It mainly involved repaying my student loans and having that money for additional investing.
"I'm proud to say that our broker was quite impressed," adds G. "In fact, he ended up telling me that I was overinsured, and he actually reduced my life insurance coverage by $250,000. It's not often you hear an insurance salesman telling you to buy less insurance!"
While the market slump of the past few years zapped G, he's not sweating. "The market correction had a big impact on paper, since we keep about 80 percent of our portfolio in equities," says G. "But that decline came after a huge run-up, so we're still way ahead of where we started, and the recent recovery has erased much of the paper losses."
Thanks to the Gs' philosophy, they're certain they'll be comfortable later in life. "We figure that it will be much easier to live a modest lifestyle after retirement because we're not living extravagantly today," says Steve. "We hope to live at least as well, if not better—more travel, theater, fine dining. We want to enjoy retirement, not spend it struggling to get by on a tiny nest egg."
2002 Total income $105,000
Adjustments
Income taxes $27,100
Property taxes 4,600
Pre-tax contributions to savings and investments 0
Total adjustments 31,700
Total spendable income $73,300
Expenditures
Housing (including mortgage payments utilities, and maintenance) $16,000
Loan and debt repayment 7,000
After-tax contributions to savings and investments 14,400
Food and dining out 5,000
Insurance (Life and disability) 5,900
Autos (gas, repairs, insurance) 5,500
Vacations 6,000
Hobbies and entertainment 2,000
Medical and dental expenses 3,500
Clothing 1,800
Charitable contributions and gifts 3,500
Miscellaneous 2,700
Total expenditures $73,300
What prompted them to write this article was a letter I had written to the editor a few months earlier. They did a profile of another doctor and his wife where they reviewed their finances, listed their assets, liabilities, and expenses, and made suggestions. MONEY magazine does the same kind of thing every month. I wrote and said that it was blatantly clear why they were having financial difficulties. Their spending was out of control, living beyond their means and not adequately saving. I went on to say that my wife and I were almost 10 years younger and earned a bit less but were in far better shape due to how we choose to live, spend, and save. The editors were so impressed that they contacted me about doing this article. So here it is:
How this young doctor keeps debt at bay
Publish Date: MAR 05,2004
This 39-year-old physician has school debt, a house, and a family—yet he's squirreled away more than $200,000.
Family physician Steven G. is a happy camper.
He's 39, he's paid off most of his medical school debt, and his savings are growing. He's on track to have college funds and retirement savings ready when he needs them—and that's on a salary of about $105,000.
No, you won't find the Gs shopping at Neiman Marcus. "Some doctors drive fancier cars or live in bigger houses," says G. "We live below our means. But we don't feel deprived. We enjoy today, but we prepare for tomorrow."
G has come a long way. He graduated medical school in 1990 with about $102,000 in medical school debt. When he married two years later, the newlyweds' joint assets totaled about $6,000. Now they're up to about $200,000, not including their house, cars, or collectibles.
G, who started practicing in 1993, is an employee in a two-doctor urban office. He and wife, 40, a homemaker, and daughter, 8, live in a three-bedroom colonial in NJ.
Other than a $10,000 gift from G's mother toward their down payment, Steve and M have built their own stash. And G predicts he'll be set for a comfortable retirement around age 62, after paying his daughter's college education.
Determined to wipe out med school debt
G vowed to wipe out his debts early on. In 1994, after he'd been in practice for a year, his Health Education Assistance Loans totaled about $62,000. That year, he started making extra principal payments (an additional $450 a month on top of the $225 due). Then, in 1999, he took out a home equity loan of $28,000 to pay off his car and part of his student loans. Those HEAL loans are down to about $11,000 now. The home equity loan has a $25,700 balance and 15 years left. "Once the HEAL loans are paid off, I'll have a chunk of money to put toward the home equity loan," he says. "I'll pay off all my debt way ahead of schedule."
G also began saving early. "We started putting $50 a month via automatic deposit into our first mutual fund in 1992, and increased that amount as my income rose," he says. The account is now worth about $22,000. The Gs have since added other funds and investment accounts, IRAs, and a 529 plan. Currently, 13 percent of G's gross pay goes toward savings and investments. Some large financial goals are looming, and the Gs aim to be prepared. "Our daughter will have a Bat Mitzvah in about five years, which we expect will cost about $20,000," says G. "Five years later, she'll head for college."
Rather than take a loan or charge the expenses, G plans to save for both the Bat Mitzvah and college. "The 529 plan we started last July now has about $3,000," he says. "Once my HEAL loans are paid off, I'll redirect some of that money into the 529. I expect to have about $75,000 by the time she starts college."
The Gs do use charge cards, but refuse to carry a balance. That keeps them from spending beyond their means, and from throwing away money on interest charges. "Credit cards can be the bane of existence for many people," he says. "We can't see spending first and then paying off; we save first, and then pay for what we want."
Despite their frugality, the Gs don't neglect charitable giving. "We donate money and volunteer our time and services to our synagogue, and support our local public television station and my undergraduate college," he says. They also donate old clothes, toys, books, and household items to Purple Heart Veterans, Goodwill, and other causes.
Taking frugality as a way of life
What's G's secret? Attitude.
"We are not into status items, and we're not upgrade happy; once we buy something we stay with it," he says. "But we don't feel like we're sacrificing. M and I enjoy our lifestyle."
The Gs will buy top quality items that are important to them. "We both love to cook, so we have Calphalon pots and pans, and KitchenAid appliances," he says. "We also have an extensive collection of Walt Disney memorabilia, and have spent thousands of dollars on it over the years. They're obviously not necessities. For things we don't consider a big deal, we buy something functional," he adds.
Take cars, for instance. The Gs own two that they bought used: a 1998 Toyota Camry LE and a 2000 Toyota Sienna LE minivan. "The Camry was a dealer demo, and had 11,000 miles on it when we bought it," he said. "I plan to keep it for another five to seven years." The minivan was two years old when they bought it last year.
"Our living room has had the same old furniture and IKEA bookshelves for the past 10 years, interspersed with some new pieces," he says. "Our house is nice, but it's not a mansion." The Gs intend to stay in their current home, although they may remodel or add on to create more space.
Finding bargains and getting the best prices also help the Gs' saving campaign. "We shop carefully," he says. "We buy some food items at Target because they're cheaper than at the supermarket. We'll pick up things at yard sales or thrift shops. Especially when my daughter was young. Why pay full price for overalls that she'll wear for three months, when you can get them for $1 at a thrift shop?"
The Gs take out novels from the library rather than buy them at bookstores, although they purchase reference books new. The family usually eats at home. "We prepare most meals from scratch. It's healthier and cheaper than dining out." And the Gs don't pay for any household help.
Vacations also reflect the Gs' stretch-your-dollar philosophy. They spend at least one week a year in Disney World, "but we stay at a $39-a-night motel two miles from the park, rather than on-site, where it could cost several times as much," he says. This year, they spent another week in Massachusetts. "We stayed at a Marriott using Rewards Points earned on our charge card."
But they also splurged. "One weekend last year, for our anniversary, we stayed at a luxury hotel in New York, ate at fancy restaurants, and went to a Broadway show," says G.
Steve and M have a crucial advantage: They have similar attitudes toward saving. "There's no way we could have accomplished what we did if one of us was a spender and the other a saver," he says. "We can't think of a single instance where either one of us wanted to blow money on something ridiculous and had to be talked out of it."
No financial advisers need apply
The Gs don't use a financial adviser. "We got a financial analysis done twice—in 1996 and in 2001—by our insurance broker," says G. "The most recent one showed a very small projected shortfall for our anticipated retirement needs. But we identified the factors that will correct that gap in the near future. It mainly involved repaying my student loans and having that money for additional investing.
"I'm proud to say that our broker was quite impressed," adds G. "In fact, he ended up telling me that I was overinsured, and he actually reduced my life insurance coverage by $250,000. It's not often you hear an insurance salesman telling you to buy less insurance!"
While the market slump of the past few years zapped G, he's not sweating. "The market correction had a big impact on paper, since we keep about 80 percent of our portfolio in equities," says G. "But that decline came after a huge run-up, so we're still way ahead of where we started, and the recent recovery has erased much of the paper losses."
Thanks to the Gs' philosophy, they're certain they'll be comfortable later in life. "We figure that it will be much easier to live a modest lifestyle after retirement because we're not living extravagantly today," says Steve. "We hope to live at least as well, if not better—more travel, theater, fine dining. We want to enjoy retirement, not spend it struggling to get by on a tiny nest egg."
2002 Total income $105,000
Adjustments
Income taxes $27,100
Property taxes 4,600
Pre-tax contributions to savings and investments 0
Total adjustments 31,700
Total spendable income $73,300
Expenditures
Housing (including mortgage payments utilities, and maintenance) $16,000
Loan and debt repayment 7,000
After-tax contributions to savings and investments 14,400
Food and dining out 5,000
Insurance (Life and disability) 5,900
Autos (gas, repairs, insurance) 5,500
Vacations 6,000
Hobbies and entertainment 2,000
Medical and dental expenses 3,500
Clothing 1,800
Charitable contributions and gifts 3,500
Miscellaneous 2,700
Total expenditures $73,300
Comment