During our discussion, the subject of finances came up, and I mentioned that our financial strategy has been to spend less rather than earn more. I mentioned our average monthly bills (besides the mortgage) come to about $500 (not counting food, hardware store purchases, and other variable expenses). The monthly bills include electricity, telephone, internet, FedEx (for our woodcraft business), home/car insurance, credit card payments (we have certain revolving charges on the credit card, such as the website hosting our ebook sales, etc.), health care premiums. Non-regular expenses include such thing as car registration, propane tank fill-ups, LifeFlight membership, Costco membership renewal, taxes (we pay quarterly), etc.
We're spending a bit more than we normally do as we renovate the house (paint, flooring, etc.), but those are mostly one-off purchases. But in general we continue to tweak and adjust our lifestyle so these costs are either maintained or decreased over time. Just this week, for example, we decided to give up our merchant services account (for accepting credit cards). Since our woodcraft business is now exclusively wholesale and we're no longer doing craft shows, our customers usually pay by check or PayPal rather than credit card. Our merchant services account charges us a base free of $35/month, plus a percentage of whatever charges we run through it. Closing that account means that's another monthly charge, gone.
This "spending less" strategy is fun. We enjoy the challenge of finding ways to reduce our expenses.
Anyway, this strategy seemed doubly smart when I read an article headlined "Celebrity surgeon went 'all in' on $180 million Bel Air mansion; then came the high-end housing glut."
The article begins:
When celebrity plastic surgeon Raj Kanodia started building his 34,000-square-foot mansion to flip for a profit, his real estate friends gave him a warning.
"They said, 'You're way out of your league,'" Kanodia recalled. "They told me, 'You'll run out of money and you'll be forced to sell it to service your debts.'"
Four years and well over $70 million later, Kanodia is feeling the weight of their advice.
The modern glass palace he built in Los Angeles' Bel Air neighborhood has been sitting on the market for more than a year. Rather than rolling in profits, Kanodia is now performing as many plastic surgeries as possible to fund millions of dollars in loans and the high costs of maintaining the empty house and grounds. After failing to find a buyer, he's now offering it for rent at $1.5 million a month and says he would consider offers of more than $120 million — marking a $60 million price cut.
The reason this caught my eye is because Mr. Kanodia is, presumably, older than we are (one website says he has "48 years of experience," so I'm guessing he's in his late 60s). At a time in life when Don and I are interested in downsizing and living on as little as possible, Mr. Kanodia is well and truly stuck with a level of debt unfathomable to us. The line that struck me most powerfully is this one: "Kanodia is now performing as many plastic surgeries as possible to fund millions of dollars in loans and the high costs of maintaining the empty house and grounds."
This is why we're looking forward to purchasing our next home without a mortgage – to be free of as much debt as possible.
Truly the Bible has it right in Proverbs 22:7: "The rich rule over the poor, and the borrower is slave to the lender."
At a time of his life when Mr. Kanodia might otherwise look to a comfortable and peaceful retirement, instead he is well and completely enslaved, arguably because of greed (his hope for a huge profit when flipping the house).
I pity him.