The Lifestyle Deflation Paradox – Decrease your lifestyle to increase it.

There is a lot of talk about “lifestyle inflation” which is basically spending the extra money one makes as one gets more advanced in a career, gets a side hustle, inheritance, stock market gains, credit (terrible idea) or whatever. What about the opposite of lifestyle inflation? We voluntarily went through “lifestyle deflation” once we realized that we were spending our way to unhappiness. It’s not as bad as it seems and totally worth the short-term pain to get back on track.

After graduating from residency, my wife (a Physician Assistant) and I did the doctor life things and went all in. Big house, new cars, monthly memberships etc. Our mantra was “If we can afford the monthly payment, let’s buy it.” We quickly realized this would lead to unhappiness as the school debt continued to accrue interest along with the mortgage, all the while saving $0 for retirement. Our possessions started to own us… no thank you.

We hit a full stop once things came to a head trying to sell a house with a faulty foundation and realized all the stuff would never fill the void of financial dependence. We culled the flock of monthly spending, rented, paid debt like crazy and read financial books and blogs voraciously.  Here are the steps we took to Deflate our lifestyle.

1. Cull the flock of monthly spending

Just because you can afford the monthly payment doesn’t mean you can afford the purchase. It’s death by 1,000 monthly cuts and anything less will enslave you to current income. Want to live month to month? You better be sure you love your job, always will, and want to work until you’re 65-70. Emancipate yourself and cut the bills down.

2. Rent out of residency

Jumbo mortgage with no down payment fresh out of training with 250K in student loan debt: aka “Doctor Mortgage”? Sign me up!

Don’t do it. Rent for at least 1 year. Make sure you like the job, city, culture etc. Get to know the traffic, schools and places you will frequent. The jumbo doctor mortgage will always be there, and your rate will be lower with something for a down payment.

We were forced to sell after 9 months in a new house purchase because we moved states for a more stable better paying job. We got 2 cash offers on the house, then the foundation cracked over a period of 2 weeks during closing. No sale.

Fast forward 4 years, 1 lawyer, 1 lawsuit, 20K in legal fees, 60K in house repairs and 2 tenants later and we sold for a 50K loss because the oil economy the house resides in is way down. Just rent out of training or when changing job locations.

3. Pay down debt

Were big fans of no debt. The peace of mind is worth any interest rate arbitrage that may or may not exist. The goal is not end wealth but a balance of end wealth, wealth during the journey and happiness along the way. Having Zero debt is for sale. Buy it asap and free yourself.

4. Read about finance

I started with White Coat Investor reading list book of Four Pillars. (Bernie is my hero).  It was downhill from there. I owe it to myself and family to read about finance. I also owe it to my patients. The more financially secure I have become (now financially independent) the better health care I am able to deliver. I simply don’t care very much about reimbursement. My decisions are totally patient driven.

“I wish I had more money” said no financially knowledgeable doctor on her deathbed… ever.

5. Read about happiness

This was the coup de grace that slayed the Lifestyle Inflation beast. I have read thousands of peer-reviewed journal articles on cancer and written dozens of abstracts, posters and articles myself. I just turned that skill and focus to the happiness literature for a few years. There is great data from very smart people (these people think very different from physicians) and it’s easily available from interlibrary loan.

Here are a few of the fruits of my labor on the topic if interested.

  1. Happiness and Income
  2. Spending Money and Happiness Part 1
  3. Spending Money and Happiness Part 2

Once I realized the limits of income on happiness and ways to spend money to increase happiness, I was motivated, hopefully for life. This has become my favorite subject lately, even more interesting than oncology (for now).

Paradoxically, Lifestyle Deflation leads to Happiness Inflation

This is my conclusion of the past few years.  These changes turned into permanent behavior change that became an addiction. We used to get pleasure from spending money, and some data suggests that spending creates happiness if you can spend more relative to peers. Big house make you happy? Only because it’s better get than everyone else. This is called relative consumption and can be read about (in great technical detail) in a paper aptly named Neighbors as Negatives.

There are negatives of Deflation.  It better to never have inflated in the first place.  It’s not easy to go from a $600,000 granite laden, triple crown molded McMansion with the Viking range and Twin Sub Zs  where the grill is hot and the pool is luke  – to a 1,600 sq foot rental.  It definitely felt like going to Owen Wilson’s – Kevin to Ben Stiller’s – Greg Focker.

I had to drop the pending deal  for that new 5 series BMW in favor of a 3-year-old Subaru.  And I won’t lie and say that I enjoyed putting my $300 shoes in a rusted out Hobbit locker at the YMCA compared to the plush human sized lockers of my past-life private gym.  But…. after a few frugal sobering months of repeated ego checking at the door of our new house, gym and car, I was free of the need for these things and emancipated from my need to keep up with the Jones’s.   It helped that the debt was drilled down and the retirement cash started piling up.

Now, I get pleasure from knowing I can spend as much or more than my peers and not doing it.   The less I spend, the less I want to spend.  I call it the Self-Restraint Positive Feedback Loop.

I drive a used Subaru and proudly park next to my partner’s $80,000 Porsche. It’s my alternative to the hedonic treadmill and has kept my family off the treadmill of Lifestyle Inflation and its myriad consequences.  Here is a classic post by Physician on Fire about the practical implications of Lifestyle Inflation or lack thereof the Doctors A, B, C and D.

The main reason for this post is that the time has come to loosen the purse strings a bit. We’re financially independent. We don’t need to supersave quite as much and I am going to make some changes soon to work less and take a big pay cut so I can spend more time with my young family and pursue non-clinical interests, such as this blog.

This post is my rationale for the past few years of restraint and also a lifeline for those inevitable times of weakness to come with lower future pay to remind me to stay strong and live a little.

What do you think?  Is deflation worth the ego hit for longer-term inflation?

10 Replies to “The Lifestyle Deflation Paradox – Decrease your lifestyle to increase it.”

  1. Wow, I see why a private home purchase might make you nervous.

    When we first started with attending salaries, I did choose to loosen the pursestrings a bit on travel, and they have continued to loosen as kids enter the fray. When it was just the two of us, I would balk at paying much more than $100 for a hotel room, or $100 for a dinner for two. Now, we live it up at big house rentals with pools and fancy-pants restaurants (without the kids).

    It makes us happy, and I know the math of FI is still very much in our favor.

    1. Good to hear my fellow FI and possible RE docs are keeping things loose. Like you, we don’t mind spending on hotels and restaurants although preferably on a conference to get good hotel rates and some food reimbursement. Recently stayed Four Seasons chicago for 320 a night which isn’t bad. How much does a week non work trip with 2 kids run you if spending to have fun?

      1. Very variable. If we are talking a week at the beach on the East Coast, it might be $3000. If we are talking a week in London or Paris, it’s probably closer to double that.

        Most of the cost in either case is lodging. It’s amazing how nice of a place you can get on Airbnb for $500/nt in a city like London. We got a 3 bedroom penthouse in central London (Bloomsbury) for around that price—enough space for us, kids and grandma. You’d be hard pressed to find a mid-range hotel room for less than $300, and we’d need 2 rooms.

        *This comment brought to you by Airbnb*

  2. As a fellow, I was spending more than I do now as an attending. Then I discovered Mr. Money Moustache, and I dramatically cut my expenses so that I could pay off my line of credit (4 years to go) and save for retirement. Like you, the initial transition was tough, as I’d been used to spending whatever I wanted, whenever I wanted. But watching my net worth grow and eventually pass zero was way better than anything I ever bought! And I have discovered all kinds of inexpensive or free activities, which have really enhanced my non-work time. I am definitely happier spending less.

    1. Glad to hear the feedback loop is working for other attendings. Stay strong on your credit pay down!

      I agree that motivation to a positive worth make it easier to stay frugal. My wife and I were about 225K student loans. It was so nice to see the monthly loan payments decrease as we paid off chucks on the debt.

      MMM is great, but a bit too frugal (cheap) for my tastes. What activities are you referring too? I need some ideas.

      1. I am definitely not as frugal as the great MMM, but I was inspired by the idea that we don’t have to work until we’re 65 if we’re careful with our money.

        As for free/inexpensive things that I enjoy: writer talks at an independent bookstore, free movies in the park, free public performances during local festivals (e.g. theatre, music), cheap tickets to an independent movie theatre, events through Meetup.com, browsing Christmas craft sales. I tend to look at the websites of stores/organizations that have inexpensive events and also to look at websites for my city that list upcoming events. In my city there are a ton of different things to choose from.

  3. I too have worshiped at the altar of sub-Z and granite. I quit reading Architectural Digest and never watch Home and Garden stuff. My mistake was befriending a home decorator. It is easy for others to spend your money. I successfully deflated my life but it was hard. Some people just can’t do it. Money stress can be avoided unlike personal health or patient care issues.

    1. It can be avoided, I met a doc the other day that said “I have to make $700,000, otherwise I just can’t live.” It’s a choice to live like that, as you say. He has 2 corvettes.

      I’ve also given up a few thousand to the decorator before we saw the light. Custom plantation shutter for my office? $2500! (They were sweet).

      It’s interesting that you stopped reading AD watching Home And Garden. It’s like you want to avoid triggers for lifestyle inflation. I did the same thing while I was weaning off the granite. Now, I’m immune, but it wasn’t easy.

  4. I transitioned from residency to attending in the same city, and lived for the next 4 years in the condo I had bought as a resident. I have read a lot of opinions that you shouldn’t buy as a resident, but it was a great choice for me–if I had been renting I can guarantee I would have immediately “moved up” in house with my first attending paycheck. I then moved in with my now husband, in a house he bought when he made about half what he makes now. We travel a lot, and buy whatever we want, but neither of us want too much. It helps that I have a lot of hobbies that don’t cost too much–running, cooking, reading, drawing. I have also found that the less I buy, the less I want, and that when I do want to buy something, sometimes getting rid of something somehow paradoxically satisfies that urge–it’s like I want a change in my environment more so than an item.

    1. Living in the same resident condo was probably good to keep you grounded as an attending. I didn’t have the option to stay on with my training program so we had to sell and of course i bought the attending house. Some of that purchase was to fuel my ego because we moved back to my hometown and I’m sure part of the big house was “look what I did with my life” to parents and old friends (and rivals too). But now that I have seen the light, I can admit that it was ego and move on.

      Your hobbies sound like mine, like almost exactly. I haven’t drawn in a while, but running, cooking and reading are top 3, next to kids of course. I do play guitar though so the creative impulse is satisfied. Do you have any drawings posted I could see?

      Seems like you are having the positive feedback loop with buying less leads to buying less. Ive never thought about getting rid of something when I want something new. That’s a good idea though. Keeps with my minimalist life.

      Thanks for the insightful comment!

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