Do not own more house than you need

This is the second article in a following series on saving money. 

Housing costs in America are cheap. If you look at the cost of rent of an average city in Western Europe, you will see that it is several times higher than most of the larger cities in the U.S. How about Tokyo or Hong Kong? Equivalent housing in New York is similar in pricing yet the GDP of Hong Kong is much lower than that of the U.S. If you are looking strictly in doctor income, you will come out ahead significantly in the U.S. If you compare the overall financial health of a doctor in an average midwestern city like Omaha to one in Hong Kong, the Omaha doctor wins by a landslide. A $3000/month mortgage in Omaha will get you a giant 4500 sq ft house with 4+ bathrooms while you get a 800 sq ft apartment in Hong Kong with questionable bathroom plumbing!

You can definitely make the payments as a doctor. But it doesn’t mean that you should splurge on your housing. Standard recommendation for housing is that you shouldn’t spend more than a third of your monthly income on housing. A doctor who still has student loan debt or is in her first five years of practice should not be spending nearly that amount. If you spend $1000 less a month on rent or mortgage, you’d save $12,000 in one year! A smaller home will also require less energy to heat and cool, less space to furnish, and less maintenance.

The perk of being a doctor in America is that you have a higher potential income and cheaper cost of living. Use that to your advantage. The amount saved can be used to fund your Roth IRAs or taxable investment accounts. Even with tax drag, a 4% annual growth on $12,000 will result in $21,611.32 after 15 years. Contribute this amount every year and you will have a hefty sum.

Ask yourself where you priorities are, and what activities, hobbies, or goods make you happy? Is it a new pair of Loubs every year? Is it an extended vacation? Or a fancy house?

 

Do you choose to put your money in your house? What do you do to control costs in your home? Sound out below!

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