Options for Living Above My Means....

[VentJockey]

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I'm tired of living within my means. I am well aware that I live better than the majority of Americans. But I'm tired of not living the lifestyle I want. Up till now, I have no debt. I have about 40K in spending limit on credit cards which I have always paid off in full the spending on them each month. I don't own a house.

I'm coming up on the end of intern year. My future plans involve two more years of residency, followed by two more years of fellowship ***only if the fellowship allows moonlighting***

So, I have been avoiding accumulating debt, but I'm on the verge of ditching that decision and starting to enjoy life a little more. Ditch this dump I'm living in and shell out for a nice place with a swimming pool. Take some international vacations. Maybe even buy that car Borat kept asking for in his movie.

Yeah, I get it, I'm irresponsible. But I'm responsibly irresponsible. So I'm looking at my options for elevating my standard of living along the lines of a plan that will have me enjoy life a bit more for the next two years, accumulating debt, then during fellowship to basically use moonlighting to sustain the lifestyle I want and pay the interest on the loans, and then actually pay them off in my first year as an attending subspecialist.

Credit cards are one option. They're the option available to me. My bank also sent me a letter offering to loan me $7500 for no good reason at 6.5% and offering to discuss a higher amount ($7500 is nice, but not nearly enough!). Then there are these mythical "doctor's loans". Can anyone point me in a good direction on where to learn about the right ways to plan?

I know financial advisers don't usually advise on how to accumulate debt responsibly to live a nicer lifestyle...but is there anyone out there who could actually give me a run down of my options and the pros and cons of them?

Please, pretty please, don't lecture me about how I should just appreciate that my lifestyle is already better than 80% of Americans. I know, and its not good enough for me 🙁.

 

[dpmd]

Borrowing money to live "the good life" is a dangerous precedent to set and you may find that you adjust to that new level of spending and then seek to live above that new level and so on until you find yourself working well into the years many people retire because you literally can't afford to retire. That or you work an insane amount just to fund all the debt you have acquired and no longer have time to do all those fun things you like.

That said, one way you can spend money now that you expect to have in the future is to get a credit card with an introductory rate. The trouble with this is what you do at the end of the introductory period. Handled poorly this will cost you more that other loans, but handled well can have minimal costs (I don't recommend relying on transferring your balance to a new card with a new introductory rate although that is one way to do it if you qualify).

 

[krl7044]

Actually, I totally get it. Being disciplined about this stuff is just as hard as being disciplined about losing weight, and once in a while you do need to splurge or eat some 'bad' food, just as long as you remain in control. While I do advocate that one should live within their means, I also am a very strong proponent of spending on hobbies or activities that you really like and enjoy, and not living like a miser. That said, I also believe in planning, so one 'model' I like might be called 'pump and dump'. One can set aside various buckets that you fund over time and set goals to fund these buckets (such as retirement and emergency reserves), but also fund a bucket called 'entertainment', and once in a while you can dump the contents of the 'entertainment' bucket all the way to 0 without feeling bad about yourself. This way you can both do the right thing and spend on things you like without feeling guilty about it. You can also be smart about spending money (at least until you can afford not to worry as much). If you like great food - fine, buy the highest quality food and cook at home and avoid expensive restaurants. I don't believe you can save your way to financial independence by pinching pennies, but if you plan your spending you can have your cake and eat it too.

 

[NICUfello]

Debt is not a bad thing. It is how you manage debt, that is key.

Good luck. My hobby is sports cars, and I have a few. I know it is a "depreciating asset," but after 30 hour shift, driving the canyon in a sports car does it for me.

I do 2-3 international vacations a year, and have done that last 20 years. It is all about bugeting.

I don't spend money on handbags, shoes, or clothes.

 

[deleted126335]

The things that you own end up owning you.

 

[Perrotfish]

I'm tired of living within my means. I am well aware that I live better than the majority of Americans. But I'm tired of not living the lifestyle I want. Up till now, I have no debt. I have about 40K in spending limit on credit cards which I have always paid off in full the spending on them each month. I don't own a house.

I'm coming up on the end of intern year. My future plans involve two more years of residency, followed by two more years of fellowship ***only if the fellowship allows moonlighting***

So, I have been avoiding accumulating debt, but I'm on the verge of ditching that decision and starting to enjoy life a little more. Ditch this dump I'm living in and shell out for a nice place with a swimming pool. Take some international vacations. Maybe even buy that car Borat kept asking for in his movie.

Yeah, I get it, I'm irresponsible. But I'm responsibly irresponsible. So I'm looking at my options for elevating my standard of living along the lines of a plan that will have me enjoy life a bit more for the next two years, accumulating debt, then during fellowship to basically use moonlighting to sustain the lifestyle I want and pay the interest on the loans, and then actually pay them off in my first year as an attending subspecialist.

Credit cards are one option. They're the option available to me. My bank also sent me a letter offering to loan me $7500 for no good reason at 6.5% and offering to discuss a higher amount ($7500 is nice, but not nearly enough!). Then there are these mythical "doctor's loans". Can anyone point me in a good direction on where to learn about the right ways to plan?

I know financial advisers don't usually advise on how to accumulate debt responsibly to live a nicer lifestyle...but is there anyone out there who could actually give me a run down of my options and the pros and cons of them?

Please, pretty please, don't lecture me about how I should just appreciate that my lifestyle is already better than 80% of Americans. I know, and its not good enough for me 🙁.

Pertinent questions:
1) what are you making now?

2) What specialty do you want? What do you expect the salary to be?

3) How is the cost of living where you live?

4) When you say you have no debt, does that include student debt?

5) Do you have any assets at all? Savings? A house? A car?

6) Do you have any long term financial goals? Early retirement/part time work? Kids going to college? A vacation home? Charity?

Living above your means is pretty simple: you find someone to pay you a dollar now, and you promise to pay them more than a dollar later, usually several dollars more than the dollar if its unsecured luxury debt. Some loans are slightly better than others, and loans for some things (like housing) come at slightly better rates, but by definition this is a losing financial proposition. If you know that your salary is about to jump enormously you could argue its an acceptable risk. However overall a small luxury now will likely cost you a large luxury later. In general bank loans are better than credit card loans but if its unsecured debt the rates all suck. Home loans are much better but only if you plan to live there for 5 years, because you also need to deal with the costs of buying and selling a house.

Be aware that, statistically, debt costs you more than you pay for the interest on the loans. There are dozens of good studies showing that, across multiple sectors of the economy, the indebted earn a LOT less for the hours they work. The explanation is pretty simple: debt puts you in a position of weakness relative to your employer in a negotiation. When the credit card payments are due you need to find a way to pay them, you become a 'motivated seller' of your services, and your bosses will see it and will lowball any offer they make to you. That's how pawnshops make money: they can pay you pennies on the dollar for your **** because they know that anyone coming to them HAS to sell something or their kid isn't going to eat that day. You are about to enter the years in your career when you will likely choose where/how you will employed for the next 30 years, which is when you least want to be a motivated seller. Short term planning regarding your employment when you finish residency (for example choosing to work as an employee rather than a less immediately lucrative partnership track, or not choosing the lucrative fellowship over the more immediate generalist attending paycheck) could cost you literally millions in lifetime earnings in exchange for a few 30-40K extra in your paycheck that year, which you would need because you took out a loan of a few thousand this year. And you would have taken out the few thousand for some nice meals a nicer wardrobe. Is it worth it?

“Interest never sleeps nor sickens nor dies; it never goes to the hospital; it works on Sundays and holidays; it never takes a vacation; it never visits nor travels; it takes no pleasure; it is never laid off work nor discharged from employment; it never works on reduced hours. . . . Once in debt, interest is your companion every minute of the day and night; you cannot shun it or slip away from it; you cannot dismiss it; it yields neither to entreaties, demands, or orders; and whenever you get in its way or cross its course or fail to meet its demands, it crushes you.” — J. Reuben Clark, namesake of the Brigham Young University Law School

 

[Stroganoff]

You can still live large and increase your luxury spending without using credit cards or loans or debt. If you want that international vacation or fancy car, save up for them in separate "vacation" and "car" savings accounts, then when that magical $15K is reached (or whatever threshold), you take the vacation. Or if you want some crazy $50K car, save up for it, then splurge. What I'm saying is you can still waste money but do so with interest working for you, not against you.

I can't in good conscience advise you on how to best game the debt system, since by definition, you can't! It's automatically a losing proposition. You're asking us for the safest technique to slit your wrist!

I'm tired of living within my means. I am well aware that I live better than the majority of Americans. But I'm tired of not living the lifestyle I want. Up till now, I have no debt. I have about 40K in spending limit on credit cards which I have always paid off in full the spending on them each month. I don't own a house.

I suppose you haven't made financial mistakes first hand, which explains why you're so eager to touch the fire. You'll learn. No one here can stop you if you're determined to take this course of action. Have fun!

So, I have been avoiding accumulating debt, but I'm on the verge of ditching that decision and starting to enjoy life a little more. Ditch this dump I'm living in and shell out for a nice place with a swimming pool. Take some international vacations. Maybe even buy that car Borat kept asking for in his movie.

Is this perhaps internship-induced? Maybe this is more psychological and internal rather than an inherent need to be fiscally irresponsible? Maybe you're unhappy on the inside, and you rationalize that you can fill that emptiness by buying things? Let me tell you man as someone who's blown a lot of coin on physical possessions and toys: it just makes things worse. It can be a positive feedback loop.

But I'm responsibly irresponsible.

I'm going to directly call you out on this. This is a dangerous way of thinking, and you're actually not being responsible in any way. You're simply rationalizing and justifying.

So I'm looking at my options for elevating my standard of living along the lines of a plan that will have me enjoy life a bit more for the next two years, accumulating debt, then during fellowship to basically use moonlighting to sustain the lifestyle I want and pay the interest on the loans, and then actually pay them off in my first year as an attending subspecialist.

Not lecturing here, but your bottom line and net worth will be better off (dramatically) if you wait until you're an attending before you splurge. Splurging is still splurging, but the difference is if you can wait just a couple more years, you'll be able to cashflow your debauchery (which is still idiotic) instead of debt financing the debauchery. Or even better, the savings and CDs you start now will be ready for your nice car, vacation, and house when you're an attending.

Credit cards are one option. They're the option available to me. My bank also sent me a letter offering to loan me $7500 for no good reason at 6.5% and offering to discuss a higher amount ($7500 is nice, but not nearly enough!). Then there are these mythical "doctor's loans". Can anyone point me in a good direction on where to learn about the right ways to plan?

Do neither credit cards nor loans.

I know financial advisers don't usually advise on how to accumulate debt responsibly to live a nicer lifestyle...but is there anyone out there who could actually give me a run down of my options and the pros and cons of them?

On the contrary, there are plenty of people who call themselves financial advisers who sell you the emotional feel good BS of using debt to fund a lifestyle upgrade. They're called predators.

Please, pretty please, don't lecture me about how I should just appreciate that my lifestyle is already better than 80% of Americans. I know, and its not good enough for me 🙁.

No one will stop you from making the grave mistakes you are about to make. I just hope you learn from them. And I don't know how you'll be able to mentally compartmentalize being in debt while you're trying to relax on a beach in Tahiti or while driving a luxury car that you don't own. Will your brain allow you to deny the truth that you don't own that vacation or that car? Will you be able to sleep at night? Here's an idea on the car thing (or boat): splurge and rent a badass car for a day or two and see if that gets your fix. 'Cause man, some of those Italian and German cars break down a lot and spend a lot of time in the shop. They will end up owning you.

It seems that part of enjoying life is the peace of mind that comes with knowing that you have FREEDOM. If you have $X Million in net worth, you know that the only reason you are working is because you truly love what you do, not because you desperately need to work just to 1) survive and pay your bills, 2) dig your way out of debt, or 3) catch up on retirement. But hey, this is your life, man! I just wish I could profit off people like you.

Edit: A lot of people on this forum would love to be in your shoes and have graduated medical school with absolutely zero debt of any kind. You don't know how good of a position you are in right now relative to other PGY-1s. The choices you make right now will literally impact the rest of your life.

 

[thesauce]

Blessed are those that don't equate happiness with spending money

 

[dpmd]

It seems that part of enjoying life is the peace of mind that comes with knowing that you have FREEDOM. If you have $X Million in net worth, you know that the only reason you are working is because you truly love what you do, not because you desperately need to work just to 1) survive and pay your bills, 2) dig your way out of debt, or 3) catch up on retirement.

This. You know how some people say that nothing tastes as good as skinny feels? Well for me, lots of things aren't worth as much as seeing the net worth square on my spreadsheet go up each month. I still do stuff like go on vacations and the car I drive was new when I bought it, but I spent modest amounts that I could afford during residency and haven't really ramped up much since becoming an attending. I don't need to because I enjoy the life I live not the things I have or don't have.

 

[The White Coat Investor]

This concept is called "consumption smoothing" and, while dangerous, isn't a particularly unusual idea. We all do it as kids (what did you make as a 12 year old) and in med school to a certain degree if you took out loans. The idea is to have a steady lifestyle throughout your life despite a widely varying income. So you spend the same as a resident as you do as an attending as you do as a retiree.

However, there is a concept you should be very familiar with before going down this path. That is the idea that it is MUCH easier to increase lifestyle than it is to decrease it. Psychologically, it really, really hurts to decrease your lifestyle. Lots of pain for a decrease, very little, and sometimes no, joy for an increase.

You also have this idea in your head that having a pool will somehow make you happy. While not impossible, that seems unlikely to me. If you decide to go down this road, try to get the best "bang for your buck", i.e. happiness for spending. It is unlikely you'll get the same amount of happiness out of a new home, a trip to Europe, and a new set of wheels. Find the one that gives you the most happiness per dollar.

 

[hysek]

Debt is not a bad thing. It is how you manage debt, that is key.

Good luck. My hobby is sports cars, and I have a few. I know it is a "depreciating asset," but after 30 hour shift, driving the canyon in a sports car does it for me.

It's always great to find someone like you.

 

[NICUfello]

It's always great to find someone like you.

😉 🙂

 

[Mbekweni]

I like the play the "credit card game" by following some of the points blogs and timing credit card applications to big promotional bonuses. I happen to have a side business which is really helpful for getting additional business credit cards that don't affect personal credit scores with hard credit inquiries. Basically a few times a year I get a card or two with a 50,000-100,000 frequent flyer mile bonus. I don't do a ton of them, but regularly get 100-200k in points a year. You just have to meet minimum spending requirements for each card, never carry a balance (interest rates on these are crazy) and then be smart about redemptions. I usually cancel cards about a year after getting them to avoid annual fees. Simply by moving your monthly spending each month onto a select group of cards you can have no increase in yearly costs but end up with a few "free" first class tickets to Europe or Asia. I just flew first class to Palau for my residency 2 week vacation, did some scuba diving without spending much at all, sure felt like living the high life to me but didn't seem particularly financially irresponsible either.

http://thepointsguy.com/
http://millionmilesecrets.com/

 

[k12balla]

I just started doing the above as well with credit card sign on bonuses for free flights. I think if you're organized and fiscally responsible you can reap great rewards. If you have a small business or pay recurrent bills ~1000/month, on your current card, it's easy to spend $3k in 3 months to meet the requirements, without changing your spending habits.

However, with that being said I'm sure these large credit card companies crunch tons of numbers and still find it more than likely profitable to offer you $700 in airline rewards to gain your business, because in the long run you will slip up...but just as white coat investor views taxes, I accept the challenge!

 

[Glimmer1991]

However, with that being said I'm sure these large credit card companies crunch tons of numbers and still find it more than likely profitable to offer you $700 in airline rewards to gain your business, because in the long run you will slip up...

Not necessarily! Especially with how easy it is to set things up on auto-pay, there's no need to ever slip. (Unless, of course, you charge more than you can pay off... which is obviously an issue.) And that's how you "win." 😉