Living within your means

[SoonerTexan]

I thought of something else that is both working and not working for us.

I'm really really good at getting nice things for a good deal. We have nice enough furniture in almost every room of our house, but 80% is hand me downs or Craigslist finds that I've refinished. The new stuff we negotiated or bought on sale. I buy nice clothes for my daughter, but they are almost never full price or from consignment. We bought a really nice car for probably 3-5k less than most people would have paid. We own a home and I think it looks pretty good, but I did a lot of the work myself. When we go on a trip, I look for good deals and use sites like VBRO. We eat out more than we should, but a lot of the time it is with a buy one get one free coupon.

Yet, I'm still spending money I don't really need to when I do these things. In theory we are saving a lot via my efforts and frankly wouldn't be able to afford a lot of it otherwise. But it is still spending that isn't necessary. A form of spaving, I guess. I'm torn!

[The White Coat Investor]

I have a hard time relating to threads like this because budgeting has never been particularly difficult for us. Of course, we have a written record of every dollar we've spent for the last decade and a half. Wait a second....maybe that's the secret.

Once you know where your money is going, you can decide if that is really what you value the most, and if not, change.

I assure you that saving/spending/budgeting is the same game whether you're living on student loans, $40-50K as a resident, $100-120K as a military doc, or a multiple of that as a private attending. Same game, more zeros. If you can't live well below your means as a resident family, you won't be able to do it as a attending family.

The secret is in the big items- your house and your transportation. Car loans are stupid. Using credit cards for credit is stupid. Buying a house anywhere near what a bank will qualify you for is stupid. Heck, buying a house as a resident is usually not a great move. You aren't what you drive, wear, or live in. It's much easier not to blow money when you have some financial goals.

Eventually, there will be plenty of money to do what you want. It's a wonderful thing to have thousands of dollars every month and to have to decide what to do with it- put it in the vacation fund, add to the kid's 529s, pay down the mortgage, blow it on a nice dinner, give it to charity etc. You get to that point by planning to get to that point.

[MAPPLEBUM]

Using credit cards for credit is stupid. .

You mean credit score, not points? As long as using one credit card doesn't incline a person to overspend I don't see what's stupid about using a credit card that accrues points.

[PrincessFiona]

We actually budgeted pretty well during training ... At least the last few years. We feel like we are bleeding money though now because of poor choices. It's just where we're at. We are actively back at a place of having talks about budgets and priorities. We're just human

[PrincessFiona]

Mapplebum, I'd only use a credit card for points if you are paying it off each month. What value are the points really when you are paying interest on the balance? Credit cards are mostly evil.

[poky]

Mapplebum, I'd only use a credit card for points if you are paying it off each month. What value are the points really when you are paying interest on the balance? Credit cards are mostly evil.

Right. "using credit cards for credit" means "maintaining a balance and paying interest". Nothing wrong with using a card if you're paying it off every month.

[houseelf]

Right. "using credit cards for credit" means "maintaining a balance and paying interest". Nothing wrong with using a card if you're paying it off every month.

As a former rabid debit card user, I recently switched to using 100% credit cards. I've had to cancel debit cards TWICE in five months for security issues. Obvs, you have to pay it off each month BUT if there is a security issue, it is on the CC company, not so with a debit card. The debit card user has to file issues individually with the bank. This is one of about 5 issues I have with the otherwise mostly great advice Dave Ramsey gives. I've thought about going all Martin Luther on Dave Ramsey on this site, but I'm not sure anyone but me would enjoy the thread. LOL.

[DrBandMe]

I don't ascribe to the biblical message Dave Ramsey has as part of his program but I do like his principles. I used to do his program with my ex husband and it works. I still prefer to use only cash. It's the best for me to reign it in.

[MAPPLEBUM]

As a former rabid debit card user, I recently switched to using 100% credit cards. I've had to cancel debit cards TWICE in five months for security issues. Obvs, you have to pay it off each month BUT if there is a security issue, it is on the CC company, not so with a debit card. The debit card user has to file issues individually with the bank. This is one of about 5 issues I have with the otherwise mostly great advice Dave Ramsey gives. I've thought about going all Martin Luther on Dave Ramsey on this site, but I'm not sure anyone but me would enjoy the thread. LOL.

Haha going all Martin Luther? I'm pretty sure I'd disagree with most of what Ramsey says.

Of course I don't carry a CC balance. When we were still figuring out finances/who's responsible for paying bills we had a couple slip ups but I honestly can't remember the last time I paid interest on the CC. It's in the order of years not months. I've said on other threads, I'm hyper aggressive making payments throughout the month and staying way below 30%. It's easy to stay honest when you keep the balance low. There's no feelings of dread when you sign on at least once a week rather than once a month.

[The White Coat Investor]

You mean credit score, not points? As long as using one credit card doesn't incline a person to overspend I don't see what's stupid about using a credit card that accrues points.

Sorry, perhaps I wasn't very clear. As someone else mentioned above, using a credit card for credit is just that- carrying a balance. The interest rates (not to mention fees) are just too high for that to be a good source for credit. You'll be lucky to find a card with an interest rate of 8 or 10% (or perhaps 0% for 12-15 months, but with a 3-4% balance transfer fee.) Compared to a mortgage at 2-4%, or a student loan at 5-8%, it's just not a good source of credit.

What credit cards are really good for is convenience. You can buy stuff online, never have to use an ATM, get to avoid ATM fees, and can have the full balance paid automatically once a month directly out of your checking account. Plus, you get this great list of what you spent your money on. We put thousands on a credit card every month for those reasons, plus the 2-5% discount you can get from a good card. I suppose it helps your credit score, but as long as you pay your bills, your credit score isn't something you ever really need to worry about beyond getting a card or two in your twenties.

However, Dave Ramsey is right that using a credit card is so convenient that you are likely to spend more money using one, even if you pay it off every month. That's okay for those who are frugal enough that they know they're saving enough to meet their goals. If you're struggling to live below your means, give serious consideration to a cash-based system. You're far less likely to bust your budget.

If you have made the mistake of using credit cards in training, pay them off as soon as possible, at least within 3 months of residency graduation. They're a great investment.

[peggyfromwastate]

I guess the only flaw I see to this argument is that medicine sometimes forces you to live in a high COL area. And then what do you do?

We decided to take on a little bit of debt in order to allow our kids to have extra curricular activities and for us to take modest vacations about every 18 months.

Beyond that... Really we do not live extravagantly and I am constantly frustrated by advise to cut back here or there. We already have. I never opted to pay high rate credit cards, or to buy expensive luxuries on credit. I don't even let my kids but hot lunch bc it's too expensive...

We can't control where medicine has sent us. And unfortunately we've gone from a high COL for med school plus residency, to a very high col for fellowship, and now I'm looking forward to a shoot me now high COL for attendinghood. There is no home that would be far below what we can pay. Just doesn't exist. So dh will have to moonlight, I will homeschool bc we can't afford private school, and still I pretty much guarantee that we will be pinched for money until payback is over and we can move to a lower COL market.

[diggitydot]

Living within your means

The COL's in your trek through the med crapfest have been ridic. The newest one makes my asshole clench just thinking about it.

When y'all are done, I know an area that has a MUCH lower COL that would love to have you all. Why, yes. Yes, I AM always recruiting.

[The White Coat Investor]

I guess the only flaw I see to this argument is that medicine sometimes forces you to live in a high COL area. And then what do you do?

We decided to take on a little bit of debt in order to allow our kids to have extra curricular activities and for us to take modest vacations about every 18 months.

Beyond that... Really we do not live extravagantly and I am constantly frustrated by advise to cut back here or there. We already have. I never opted to pay high rate credit cards, or to buy expensive luxuries on credit. I don't even let my kids but hot lunch bc it's too expensive...

We can't control where medicine has sent us. And unfortunately we've gone from a high COL for med school plus residency, to a very high col for fellowship, and now I'm looking forward to a shoot me now high COL for attendinghood. There is no home that would be far below what we can pay. Just doesn't exist. So dh will have to moonlight, I will homeschool bc we can't afford private school, and still I pretty much guarantee that we will be pinched for money until payback is over and we can move to a lower COL market.

Yes, when you only get into med schools in high COL areas and can only match into residency/fellowship in a high COL area you are pretty much hosed, at least for a while. Do what you can to minimize the damage. Whether you could or couldn't go to a lower COL area in the past is all water under the bridge. But last I checked, just about any specialty can get a job in a low cost of living area as an attending. Lots of physician families are faced with the decision of living a middle class lifestyle in Manhattan or the Bay Area, or living a luxurious lifestyle in Indianapolis or Texas. If you decide to put down roots in San Francisco, it will have real consequences- no early retirement, smaller house, less money for college etc. It isn't that a doc family can't afford to live there, it's just that they won't live the same as they would in Reno or Eugene or Dallas or St. Louis.

[Sheherezade]

They are military. No choice, they are assigned

[HouseofWool]

And where they are headed makes San Fran look reasonable.