I’m About to Have a Ridiculously Low Cost of Living

I made mistakes, but they’re going to make me a millionaire

I have been writing about investing and personal finance for roughly ten years.

Making every mistake in the book actually makes me a better writer. There’s nothing like fits and starts, temporary success, and abject failure to inform what you write about.

I’m not too proud to admit this.

But still, revealing this makes me cringe.

I have monthly car-related expenses (payment, gas, insurance) of $476.64.

I have a monthly consumer debt payment of $300.66.

That’s the exact type of stuff people like me tell other people not to do. I’m either a hypocrite or it’s more powerful coming from someone who has lived it.

You decide. But be gentle. Please.

There’s a bright side to this $777.30 I throw away each month.

When combined with rent of $1,342.72, utilities totaling $129.85, and groceries/entertainment expenses of roughly $250, my monthly living expenses come to just $2,499.87.

I’m proud to say I live — and live well — on $2,500 a month in Los Angeles.

I’m even more proud to say I’m on track to move to Portland next summer minus the $770.30 I misguidedly saddled myself with.

Learn from the stupid mistakes I made. I know I have.

From there, you’re safe to take cues from how I plan to live once I’m debt-free.

Don’t Buy A Car. Don’t Own A Car. Ever.

Avoid a car at all costs. And if you absolutely must have one, do it on the cheap. For me, I will never own a car again. Walk. Bike. Lyft. Uber.

When I moved to California more than 20 years ago, I got rid of my car. I lived car-free for seven years in San Francisco, two years in Orange County, and six of the 11 years I have lived in Los Angeles.

It got to a point where, like so many Angelenos, I couldn’t live my life without a car. That’s a big reason why I’m moving to Portland. I can live there car-free.

Here’s the number one problem — outside of the debt — with owning a car:

It’s super easy to get used to owning a car.

Don’t fall into the trap I did.

Don’t buy your car online. It’s too easy to commit. Oddly, the salesperson-free, seemingly no-pressure environment makes it easier to yes.

Don’t buy new.

Don’t go for the sales tactics of rolling every extra in the book into your monthly payment. Even if you buy online, you go into a dealership to sign and pick up your car. That’s when they nail you. You’re not about to give up the car you bought on your smartphone three days ago. You’re too excited.

Don’t start to think you like your “alone time” driving around with the radio and A/C cranked. You think you look cool in the reflection of other cars and storefront windows. You probably look like an idiot. I’m sure I do.

Put on a pair of headphones and sit under a tree in a park. That’s cool.

Cars — the biggest ball and chain in personal finance.

The best advice in personal finance — move some place where you don’t need a car.

Maybe you’ll pay more in rent — though not necessarily — but you’ll make up for it by not owning a car.

I’m selling my car the second I set foot in Portland. Some sucker will be there, ready and waiting, more than happy to buy it.

It costs, on average, $706 a month to own a car in the United States. I’m below average and not proud of it.

Don’t Take Out A Personal Loan, Under Any Circumstances

The offer came in the mail. I was between jobs. I was about to move from Santa Monica to Los Angeles. I would use the money to transition, work my tail off for three months, and pay the loan back in full.

That didn’t happen.

Turns out, I manage the monthly payment with ease, so why tap into savings or, worse yet, my investments to pay off a loan with such a low interest rate?

That’s one way you trick yourself into believing you have good debt.

It’s a temporary measure. Then, once you’re making payments, they’re manageable. So you keep making the payments. It’s a vicious emotional cycle we use to rationalize poor decisions and needlessly inflate our cost of living.

There’s no such thing as good debt.

So I’m getting rid of it. Lesson learned.

I can’t bear the pain of digging into my investment portfolio to pay off this stupid loan, even though the personal finance writer in me knows I should.

So I made additional payments on it for the last few months, getting it to a number, where I at least won’t throw up when I tap into savings to pay the balance.

But, once I pull the trigger next month, I’ll have wiped away that $300.66 monthly albatross.

Don’t take out a loan. For anything. Not even a house.

Next to buying the car, the personal loan was the dumbest thing I have ever done. I made both transactions in what felt like a haze. I don’t even remember signing the paperwork or hitting send in either case. Both were moments of temporary insanity. Both needlessly jacked up my already low cost of living.

However, I’m happy to have made the mistakes because they provide the resolve I need to not only not make them again, but to do better.

I know what it feels like to be a complete fool. I don’t want to feel that way again. Ever.

Once I’m Debt-Free, My Cost Of Living Will Be $1,722.57 A Month.

Let’s round that up to $2,000, just to be safe.

Two grand a month to live in one of the best neighborhoods (NW 23rd Avenue/Nob Hill) in one of the best cities in America — Portland, Oregon. Don’t believe what you see on the news. The dream of the 90s is still alive in Portland.

Right now, every penny I make after I pay my expenses (and take care of eliminating the loan payment) goes into an investment account comprised of dividend-paying stocks, such as Apple, Starbucks, and AT&T.

Plowing just an additional $500 a month of cash, soon-to-be freed from the shackles of my financial inanity, will make a world of difference. The numbers don’t lie.

If you start with a $20,000 portfolio in dividend-paying stocks and add $1,000 a month, using conservative estimates on returns (5% annual dividend yield, just 1% annual dividend growth, and 3% annual stock price appreciation), here’s how things look after 20 years:

Up that monthly contribution to $1,500 a month and it’s incredible to see the difference an extra $500 out of your budget can make:

You go from being a hundred thousandaire to a millionaire. From just over $700,000 invested to a more than $1 million portfolio.

But the key number from that chart is the annual dividend income — $62,570.14 a year in the second scenario. That’s money you can — down the road — stop reinvesting and take as cash. You don’t even have to touch the principal balance. You can live off of your dividends.

This is how old people invest. That’s why so many of them are rich. No matter how old you are, invest like an old person. It’s the safest and most logical wealth-building route.

Don’t fall for the bells and whistles of a Robinhood account.

Get your life where and how you want it.

Chip away and rid yourself of all debt.

Along the way — and definitely once you’re debt-free — invest every single penny into stocks that pay dividends.

Check “yes” next to dividend reinvestment in your brokerage account.

Each time one of your stocks pays a dividend, it will automatically get reinvested into more shares of that stock.

Add new money to buy even more stock, methodically, each month.

Over time, the magic of compounding begins to work in your favor. That $770.30 I’m paying to a bank or finance company each month right now essentially represents compounding working in somebody else’s favor.

I was so happy with myself — living on $2,500 a month in Los Angeles.

Everyone thought it wasn’t possible.

I let this accomplishment lure me into a false sense of security. I chalked up the $770 to “own” a car and service debt the cost of doing business.

I was living frugally so what’s the big deal? Except it was — and is — a big deal.

I was throwing money away. By eliminating this debt from my life, I can really accomplish something. A great life in a great city on just $2,000 a month.

I’ll be below average and super proud of it.

This article is for informational purposes only, it should not be considered Financial or Legal Advice. Consult a financial professional before making any major financial decisions.