I've referred to this article in a couple of posts and several people asked if they could read it. I was hesitant to post a direct link because of the personal info, full name, town, etc. So instead, I've copied it here and edited out my last name and exact location. I've also removed the source, but it was a national financial magazine geared toward those in the medical field.
Keep in mind that this article was published over 3 years ago and was written about 6 months before that, so it is nearly 4 years old. Our numbers are even better now as my student loans are gone, DD's 529 is over 21K, we are still driving the same 2 cars mentioned, our investments have nearly doubled to 390K and we now save 18-20% of income, not 13% like in the article.
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How this young doctor keeps debt at bay
Mar 5, 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 G.s 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, Marci, 40, a homemaker, and daughter, Jennifer, 8, live in a three-bedroom colonial in New Jersey.
Other than a $10,000 gift from G.'s mother toward their down payment, Steve and Marci 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 G.s 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 G.s 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 Jennifer starts college."
The G.s 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 G.s 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. Marci and I enjoy our lifestyle."
The G.s 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 G.s 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 G.s 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 G.s' 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 G.s 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 G.s don't pay for any household help.
Vacations also reflect the G.s' 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 Marci 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 G.s 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 G.s' 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."
Where their money goes
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
Article about me in national magazine
May 28th, 2007 at 01:55 pm
May 28th, 2007 at 02:50 pm 1180360251
Happy Memorial Day!
May 28th, 2007 at 03:19 pm 1180361989
Thanks Steve!
Lorie
May 28th, 2007 at 04:31 pm 1180366313
May 28th, 2007 at 08:23 pm 1180380181
May 28th, 2007 at 08:44 pm 1180381480
thanks again, now I do not feel bad about driving my '89 camry
May 28th, 2007 at 08:53 pm 1180382005
Amber - How many miles do you have on that '89 Camry? I had a '91 that I traded in in '98 with 127,000 miles. If I still had that car, it would have well over 225,000 miles by now.
May 29th, 2007 at 01:18 am 1180397882
May 29th, 2007 at 04:16 am 1180408618
Congrats on the article and the great job you have done planning for your future!
I wish we only had to pay for one college education and one wedding, but we have three girls! AHHHH!
May 29th, 2007 at 11:13 am 1180433604
Anyway we sold it (the silver Tercel) to my father-in-law for $1500.00 and he is still driving it, has well over 200,000 miles on it and I don't think they have done much of anything to it maintenance wise.
My very first car, a Datsun B210 hatchback 1977 model, oh goodness.... two carseats in the back.... I sold that to my father when it had about 100,000 miles on it and he drove it until the body rusted away.
So I learned my lesson, current 1994 Plymouth Voyager is starting to look sort of bad, but it has almost 180,000 miles on it. I'm driving it until it drops dead or starts leaking (which may be a possibility since it is really starting to get rusty on the hood).
May 29th, 2007 at 09:31 pm 1180470674
June 2nd, 2007 at 02:59 pm 1180792755
Thanks for sharing the article. This means others besides the savingadvice family can read how you can be frugal and still enjoy life!
June 4th, 2007 at 09:16 pm 1180988196
Keep up the good work!
June 5th, 2007 at 06:05 pm 1181063141
Yes, our attitude remains the same. Enjoy today but prepare for tomorrow. I want to be able to retire while I'm still young enough to enjoy it.