I wrote an article back in January 2018 that discussed why I no longer worry about inflation.
My thesis broke down the important difference between relative and absolute changes in one’s expenses over time.
While a lot of people only look at inflation in relative terms, they should be looking at it in absolute terms. It’s the latter that ends up truly affecting one’s aggregate costs over the course of their life.
Essentially eliminating the issue of inflation from my life was preceded by my move abroad.
I decided to take advantage of geographic arbitrage, which I believe is vital to the success and enjoyment of an early retirement lifestyle.
It’s so vital that I take quite a bit of time to discuss it in my best-selling book, 5 Steps To Retire In 5 Years.
But it’s one thing to talk about moving abroad and no longer worrying about inflation.
It’s another thing altogether to actually move abroad and experience local inflation over a longer stretch of time.
What does this look like in real life, in real-time?
Revisiting Inflation In Chiang Mai, Thailand
I dismissed future concerns about inflation in January 2018.
That was only four months after indefinitely moving abroad.
One could argue I was putting the cart before the horse.
But I’d disagree. I rely on facts, not feelings. The facts show that inflation is almost certainly a non-issue if you move abroad to the right country and set your life up correctly. A modicum of research and thoughtfulness goes a long way.
However, I do like to keep myself accountable. And I like remaining transparent.
So I decided to publicly look into inflation here in Chiang Mai, Thailand after living here for one year, using my expenses as a base of comparison. Since I wasn’t changing where I was living, where I was eating, or much anything else about my life, I was able to draw some reasonable conclusions.
Now, one year isn’t a terribly long time. But if there were a high degree of local inflation, I’d probably start to at least see something in the way of rising expenses.
Well, it turns out that revisiting inflation after one year revealed a local level of inflation near 0%.
That jibes with the official numbers that I’ve been able to find. Inflation in Thailand has been extremely low for years.
The World Bank has Thailand’s current inflation rate at 1.4%. That’s notably lower than the 2.3% inflation rate they’re showing for the United States.
That means Thailand is significantly cheaper and has a lower inflation rate than the USA. This is the perfect scenario, folks.
All well and good, but I’ve now lived in Chiang Mai, Thailand for two years.
I think that marks a good time to take another look at local inflation.
This one’s easy, yet again.
Nothing has changed here. Still.
I was paying 14,000 baht per month for my luxury, furnished, one-bedroom apartment in October 2017.
I’m still paying 14,000 baht per month (~$456/month based on the current exchange rate, which is slightly higher in dollar terms than it was this time last year) in October 2019.
Since overall inflation as it’s seen at the personal level will likely be disproportionately impacted by any rises in housing costs (due to housing usually being one’s largest single expense per month), it’s already pretty much a huge win here. I can tell that right off the bat. The thesis is intact.
Keep in mind, too, that my 14,000 baht includes the luxury apartment, furnishings, water, satellite TV, Wi-Fi, 24/7 gated security, fingerprint access, a pool, a gym, a sauna, and a perfect location in the city.
Since rent includes most utilities, that keeps inflation in those categories in check, too. No worries about, say, rising costs to access the Internet – something that will surely impact people living in the USA.
My girlfriend, Oh, moved in with me not too long ago. So that’s a lifestyle change for sure. But other than some minor increases in electricity usage, this doesn’t affect how much I pay for housing. And that would be unrelated to inflation anyway.
Next to housing, most people spend most of their net income on food.
Now, I’m not in any way trying to live cheaply when it comes to food, nor am I attempting to live cheaply in any other way across the board. I came to SE Asia to get more life for less money. I have no interest in winning some kind of cheapskate prize.
I’m living the lifestyle I’d like to live, regardless of money. It’s just that a value-conscious person living in one of the best-value cities in the world ends up spending relatively little money. That’s a natural byproduct of setting one’s life up correctly from a structural, holistic viewpoint.
In regard to food, I’m eating out for every single meal (which is twice per day, as I intermittently fast and eat only lunch and dinner).
And I’m usually paying for two people: I voluntarily accommodate my significant other due to the large gap in our personal economies.
We tend to eat at a rotating stable of local markets and restaurants. While I’m not living cheaply, I do pay attention to price (in relation to value). So I’m very aware of what things actually cost.
There have been some very minor changes here in terms of pricing.
While I’d say that Western restaurants haven’t changed much, if at all, in terms of what they’re charging, the local Thai markets have slightly increased their prices over the last two years.
When I first moved here, the going rate for a dish at a typical Thai market was 35-40 baht.
It’s now consistently in the 40-45 baht range. This change started to actually occur about a year ago. Finding a place that will charge you 35 baht is very rare nowadays.
So we’re talking ~5 baht more for comparable dishes at comparable markets.
Going from 35 baht to 40 baht is a 14.3% increase over the course of two years. Looks like a big number in relative terms. But it’s almost nothing in absolute terms.
That translates to just $0.16. Obviously, a 16-cent increase in the cost of a local dish of food is negligible. It’s almost a rounding error for me.
Meanwhile, I know for sure that McDonald’s hasn’t changed their prices since I got here. I’m actually surprised about that. I figured they’d move up by now.
The same could be said for local pizza joints and many other places that serve various Western foods.
This is speaking about the places we frequent. I can’t speak on every restaurant in the entire city of Chiang Mai, nor can I give you information on every restaurant in Thailand.
Coffee is another big expenditure for me. I’m at a coffee shop seven days per week, producing content, consuming content, and enjoying my afternoons.
The cost of my iced caramel macchiato that I order every day has gone up over the last year.
It was 70 baht this time last year. It’s now 75 baht. That’s less than $2.50 for what you might call a “grande” size.
Again, the change in relative terms is much larger than the change in absolute terms. But all that matters is how much I’m spending. It’s a $0.16 difference. So it’s another rounding error.
Actually, as I noted in last year’s inflation update, this coffee shop started a loyalty program since I moved here and started frequenting the establishment. I get one free coffee for every 10 coffees I buy. That’s almost like a permanent 10% discount, which basically brings me right back down to 70 baht. Therefore, I’d say the cost of my coffee is unchanged over the course of two years.
This one’s a bit tougher to nail down because there are many ways to transport oneself around. If you own transportation (like a car or a motorbike), then you’re obviously exposed to all kinds of volatile input (repairs, the cost of gas, etc.).
Since I naturally prefer to walk as much as possible, my transportation costs are obviously very limited. Moreover, there’s very little variance because there’s almost no input.
That all said, I can say that there have been some changing market dynamics over here in Chiang Mai that have caused rising costs for me on my transportation.
Specifically, Uber exited all of Southeast Asia in 2018. That left the local competitor here, Grab, to grab (see what I did there?) that remaining market share and raise prices as a monopoly.
Whereas I was actually sometimes getting around town for free with Uber (after using generous promo codes), that’s a neat trick I haven’t been able to repeat with Grab (due to less generous promo codes).
I’m unable to fully express with hard numbers what kind of change has transpired here in two years. I haven’t found a reliable way to track Grab’s base costs or anything else. And the promo codes can range from amazing to non-existent, depending on the day. Plus, I don’t have any kind of routine type of transportation schedule that allows me to easily compare trips or costs from one month to another.
Either way, this doesn’t really affect me.
That’s largely because I don’t spend much on transportation in general. I’m usually spending $30/month or less on transportation. So any change here is immaterial.
Also, the costs to use a ride-sharing app here are still substantially less than what you’d be looking at in the States.
Uber’s minimum fees in most US cities far exceed what I pay to get all the way across town. Most of my trips average somewhere around $1.50 (after a promo code), and that’s to go a few kilometers away.
Furthermore, the longstanding local “public transportation system” that’s prevalent – red cars, or songthaews – still charges the same 30 baht per trip that they did in late 2017. We take the songthaews when it makes sense.
Lastly, there’s been a development that potentially somewhat offsets the disadvantageous exit of a competitor in the ride-sharing space. That’s the recent introduction of a bus system in Chiang Mai. It costs 20 baht per person for the whole route.
The bus system is the first leg of a more complex public transportation system that’s being scaled in CM, to be later supported by an already-approved light rail system.
Oh and I will sometimes take the bus when it’s convenient. It’s particularly nice to take it to/from the airport. Spending less than $1 to get to the airport is pretty awesome.
Overall, I’m hesitant to say outright that transportation here across the board is more expensive on a YOY basis. It really depends on how you’re getting around. The building out of a more traditional public transportation network will make getting around Chiang Mai easier, faster, and cheaper than otherwise.
Other costs are almost universally the same as they were when I first got here.
I currently spend 2,700 baht (or ~$88) for a three-month membership to my local gym. That’s the same as it was in October 2017.
I currently spend 500 baht (or ~$16) on my mobile phone plan, which includes unlimited mobile access to the Internet (and even unlimited hotspot usage!!!). That’s also the same as it was two years ago.
I also shave quite a bit, requiring the regular purchasing of razor blades and shaving supplies. The price of all of this remains unchanged since I got here.
While not related to inflation, anyone living abroad does have to account for any long-term changes in a currency conversion rate.
I’ll quickly note here, however, that this is also basically a non-concern for an American expat living in Thailand.
This might be different if you’re coming from a different country with a weaker relative currency (like the British pound or Australian dollar), but the US dollar has held up remarkably well against most global currencies over the last decade or so.
There’s been some minor weakening over the last year when you look at the US dollar against the Thai baht, but it’s fairly unchanged over the last decade. The accurate way to judge something like this is to look at long-term statistics, not short-term anecdotes.
There has obviously been some oscillation over that time frame, and you could even argue a very slight long-term downward trend for the dollar against the baht, but I wouldn’t say it’s a major issue. It’s definitely not something I’d spend more than even a minute per year thinking or worrying about.
For perspective, a dollar bought just under 30 baht in late 2007. It now buys just over 30.5 baht. That’s more than 10 years of hard data.
If you’re Australian or British, this is a very different story. But I’m American, so my frame of reference is based around the US dollar.
My thesis is still intact here.
I haven’t experienced much inflation at all after two years in Chiang Mai, especially in the categories that count the most (like housing).
Overall YOY inflation across my entire budget is minimal. I’d be willing to bet it’s well under 1%. It’s probably closer to 0% than anything else. Other than a minor change in how much Thai markets charge, local costs are almost completely unchanged in two years.
In my view, the big variable is really the lifestyle.
Lifestyle inflation is surely more of a danger for an expat than inflation at the economic, country-wide level (which is also mostly true for a non-expat living in their home country). It comes down to personal choices more than anything else.
While my apartment costs the same as it did last year (and the year prior to that), it would be easy for me to move into a bigger, more expensive apartment and thus spend more on housing. Inflation might be at zero on an apples-to-apples basis, but my lifestyle would be causing a higher level of spending. Fortunately, I’m very happy with where I live.
I will say, the big lifestyle change I’ve taken up over the last year is to have Oh move in with me. I’m naturally spending just a little bit more on stuff like food and electricity. Personal choices like this affect my finances more than local inflation.
And while the currency exchange rate might seem to be an issue in the immediate sense (i.e., you might spend more or less USD for your baht in any given ATM withdrawal), this smooths out over the long run. Indeed, the exchange rate today looks pretty much the same as it did 12 years ago, even though it’s been slightly bumpy along the way. I don’t really concern myself with these daily/monthly gyrations much in the same way that I don’t concern myself with daily/monthly gyrations in the stock market.
It’ll be interesting to take another look at this in one more year to see if there are any changes, but I suspect it’ll once more come down to the lifestyle (rather than an issue with broader economic inflation in Thailand or Chiang Mai).
What do you think? Was this interesting? What does inflation look like where you’re at?
Thanks for reading.
Image courtesy of: Sira Anamwong at FreeDigitalPhotos.net.
P.S. If living abroad interests you, which could allow you to sidestep most inflationary worries, check out some amazing resources that I personally used to become financially free at 33 and relocate abroad as an early retiree!