Time to open up the books on how much money I spent last month.
Managing expenses is absolutely critical to becoming financial independent at a young age. In fact, I’d argue it’s much more important to be an excellent saver than an excellent investor in this regard.
And in order to save, you must limit expenses. Making more money is great, but not locking down the appropriate lifestyle first by adopting a scarcity mindset will almost surely simply result in lifestyle inflation.
Someone earning $100,000 per year but spending $90,000 per year will probably never retire (and certainly not early), but someone earning $40,000 annually and spending just $20,000 of it per year will become financially independent in a reasonable amount of time (likely within a decade or so).
I consistently saved well over 50% of my net income in order to go from below broke in 2010 to financially independent in 2016. In fact, I was routinely hitting monthly savings marks above 70%.
And I was working a regular, middle-class job during much of that period.
Everything was hinged upon my ability to live below my means, enjoy most elements of frugality and minimalism, and totally believe in a future me who was already financially independent and taking advantage of that freedom.
While I no longer have to, or even really attempt to, maintain a high savings rate, keeping my expenses low is still vital to maintaining my financial freedom.
You can’t get to a point to where your passive income starts to cover expenses, then just ramp up spending. You have to more or less maintain the same lifestyle that got you there.
That all said, I could technically spend much more than I do.
My basic expenses in life are covered by passive income. I earn five-figure and growing dividend income from my FIRE Fund. And I have passive online income like royalties from my best-selling book. All in, passive income is north of $1,300 per month – and growing.
But I also earn a rather significant amount of active income from my ongoing writing and coaching efforts.
As such, the early retirement math has been rendered moot for me (as it will be for almost anyone chasing after financial freedom).
However, I don’t ever want to regularly rely on that active income.
If I were to rely on it, I wouldn’t be financially independent any longer. In addition, relying on that income would likely negate a lot of the enjoyment I get out of writing, turning work into a job.
I may sometimes use some of that excess income for travel or other extraordinary personal spending, but this is a complementary and voluntary addition to my regular, everyday life which is underpinned by passive income.
Moreover, my everyday life is fun, free, and functional. It’s completely delightful. It’s customized for me and by me. There’s no sacrifice. I don’t ever wake up and feel like I’d be much happier if I spent a lot more money. That’s not how happiness works.
While my ability to live on relatively little and be very happy and fulfilled has been built on an overall life philosophy, that ability has been further bolstered in a major way by relocating to Chiang Mai, Thailand indefinitely as a dividend expat.
Because the cost structure here is so much lower than what exists in the US, I don’t have to watch and stress over every penny in order to get my spending down to a level that’s roughly in line with my passive income.
If anything, I spend exactly zero effort in managing my expenses these days. The “effort” has been replaced by a structural realignment of expectations and beliefs, along with a major move abroad that takes advantage of geographic arbitrage.
With that introduction out of the way, let’s get into my real-life spending for April 2018…
|Rent & Utilities||$487|
*Everything Else includes expenses that I don’t have a regular budget for. In this case, it was exercise clothing.
It’s not all that often I eclipse $1,300 for a month’s spending here in Chiang Mai. That’s kind of a crazy thing to say when considering that my life hardly resembles the one I was living not too long ago in the US, where I had to implement extreme frugality in order to get to where I needed to be on the budget.
My lifestyle is now completely carefree. Never do I think or worry about money or spending before I engage in any activity. As Forrest Gump would say, “That’s good. One less thing.”
What’s super interesting about this is that it required herculean effort on my part in order to get my spending down to $1,300 per month in the States – and that was even with splitting household expenses with my significant other. I now have somewhat of a difficult time spending more than $1,300 per month in Chiang Mai – and that’s even with paying for two people most of the time. I mean, that sums it up pretty well right there.
Lifestyle decisions are now based around happiness, purposefulness, intentionality, and value. That’s it. To be in this position is something I worked and fought incredibly hard for. And it was totally worth it.
Getting into individual budget categories a bit, I decided to pick up some new workout wear in April. That was noted earlier.
I wear gym clothing six days per week in the daytime. In fact, if you were to run into me on the street (or in the coffee shop) on any given afternoon, the odds are pretty good you’d see in me in gym apparel. It’s the closest thing I have to a “uniform” these days. And so I wear this clothing out over time. It’s very much worth it to me to replace this apparel as needed. Of course, as a shareholder in Nike Inc. (NKE), I found myself picking up some nice Dri-FIT stuff in April.
I also spent quite a bit at the coffee shop this month. This was higher than usual. I don’t believe there was one afternoon all month in which I wasn’t at my local spot.
In addition, my significant other, Oh, was with me for quite a few of those days. She really enjoys having a slice of cake or a muffin while we’re there (and so do I, if I’m being honest), so that adds up. Still, $97 for 30 days, for two people for a good chunk of the time (that’s $3.23/visit), is fantastic.
To that point, most of the spending you see above, as I’ve discussed a few times now, is practically for two people.
That includes food for two, too, which is eaten exclusively out of the apartment. No shopping, preparing, cooking, or cleaning. Just eating. Even I can do that!
Lunch is almost always eaten at a nearby market. But dinner varies. It’s sometimes the food court at the local mall. We definitely love the various night markets around town. And we also visit local restaurants (usually serving Thai food) often. But it’s just the two meals – lunch and dinner – per day. I’ve been intermittently fasting for some time now. It’s been working out great.
The rent bill (which wraps in electric) was a tad high this month because it’s very hot here in Chiang Mai right now. I’m using the air conditioning liberally. And May’s bill will be even higher – I know this because the electricity bill for April already came my way.
But we recently brought a fan into the apartment to cut back on the electricity. I won’t needlessly sweat just to save money, but I’m also not a fan of using more energy and money than necessary. To be fair, this was Oh’s idea. Bless her. I’ve been almost exclusively using the fan in lieu of air conditioning over the last week or so. It’s been surprisingly enjoyable.
Speaking of rent, my significant other is encouraging me to consider moving to a different apartment. As I recently noted on Twitter, she believes we can do a bit better on price.
I’m already aware of the fact that many cheaper apartments are nearby, but I’m not so sure we can do a lot better in terms of value. But I’m looking around with her. Again, bless her. She’s just looking out for my best interests. And she doesn’t want to see me spend more than I should or could. She’s even okay with the idea of moving into a place that isn’t as nice or new.
I’m personally amenable to a move if the right place pops up. However, she’s found, through this process, that there aren’t as many competitive options as she initially thought. She lives quite far from the old city, so she wasn’t initially aware of the market’s options/valuation. So we’ll see on this one. Thus far, we haven’t found anything appealing.
We can find many apartments that are less expensive, and they’re sometimes even of similar quality/size, but the locations aren’t nearly as desirable/walkable. That’s why they cost less. You’d need a car or motorbike (or at least a bicycle) for these places to be suitable, which is a totally different ball game than my walkable lifestyle that I truly love. And the rent savings would thus be mitigated somewhat, or potentially completely, by the extra transportation costs. That’s before factoring in the additional risks (Thailand is one of the most dangerous countries in the world in terms of road fatalities per 100,000 people).
I also picked up an electric razor this month to help cut down on the Gillette Fusion (a Procter & Gamble Co. (PG) product) blades I go through like candy. So far, so good. I find myself able to use my blades a little longer. And I find my face just slightly less irritated after shaving (I shave against the grain twice per day), which is honestly the main benefit of the idea.
Overall, I’m pretty pleased with this level of spending.
Not only is it a relatively little amount of money to spend, which allows me to enjoy financial independence with a carefree disposition, but there’s also so much value in my life. I never feel like I’m getting “ripped off”. Dropping $3 on a delicious lunch for two, for example, always brings a smile to my face.
Also, there’s little variability in my spending. Every month looks a lot like the prior month, which is different than how things used to be. Even little surprises in the States can add up quickly due to the different cost structure. That’s different here in Chiang Mai, as I recently showed with my surprise health scare. The lack of variability adds to the easygoing nature of living here. I don’t feel like I’m one unexpected event away from spending hundreds or thousands of dollars on something.
I’ll quickly point out that there’s no visa expense in this report. That’s because I’m staying in Thailand on a one-year ED visa, which was settled earlier this year. As such, there’s very little ongoing costs to maintaining that. But I think you could go ahead and add $100 or so (based on the visa costs stretched out over a year) to the above expenses to get a full look at what life is costing me here.
And, of course, this factors out any outgoings that wouldn’t exist if I didn’t have an online business (business expenses, business taxes, philanthropy, student loans, etc.).
This level of spending is a comfortable base for me. I suspect that I’ll be more or less in this range of spending most months, outside of occasional travel and the annual visa concerns. I could spend less (especially on housing), but I have no desire or need to. I could also spend quite a bit more, but I equally lack that desire and need.
Full disclosure: I’m long NKE and PG.
How was your spending for April? Did you meet your expectations? Why or why not?
Thanks for reading.
Image courtesy of: Stuart Miles at FreeDigitalPhotos.net.
P.S. If you’re interested in becoming financially independent at a young age, which will involve controlling expenses, check out some amazing resources that personally helped me become financially free at 33.