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 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 really even 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 spending that got you there.
That all said, I could technically spend much more than I do.
Passive income covers my essential expenses.
I earn five-figure and growing dividend income from my FIRE Fund.
It’s a pretty wonderful life position to be in. I’m very fortunate. And very grateful.
All in, passive income is north of $1,400 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 in FIRE).
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 everyday life that’s supported by passive income.
That everyday life, by the way, is fun, free, and functional. There’s no sacrifice. Even though I don’t spend very much, I don’t ever wake up and feel like I’d be much happier if I suddenly spent a lot more money. That’s not how happiness works.
While my ability to live on relatively little and still feel happy 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. I’ve taken maximum advantage of geographic arbitrage.
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 2019…
|Rent & Utilities||$490|
I’m super happy with this spending outcome for last month. Couldn’t be more pleased.
I mean, this is less than $1,300 on a dream life – for two people. As I’ve noted before, I voluntarily cover Oh’s way whenever we’re together. Although she earns a very healthy income over here and owns a three-bedroom house, our economic realities are still quite different.
Almost everything across the board was pretty much right in line with long-term results thus far.
Some spending was a bit off, though.
Notably, the Food budget category came in slightly low. I believe this was simply a product of eating less Western food.
We usually eat Thai food 80%+ of the time, but I think it was almost exclusively local markets throughout April. Also, Oh was working evenings more often than usual. This limited our dinners together, which just so happens to be the larger and more expensive of the two meals I eat per day.
Conversely, the Health budget category came in high.
This was partially due to the timing of certain personal product purchases, which happened to land early in the month.
In addition to that, I saw a healthcare professional a few weeks back about minor skin issues I’ve been dealing with for some time. So that modestly increased the spending in this category.
Amusement was also a bit higher than ordinary.
Songkran (the Thai New Year’s holiday) came to pass in mid-April and we celebrated quite a bit. I also found myself in a co-working spot on the evenings when Oh was working. Mostly, we were just generally having fun and spending on experiences that we enjoy (massages, movies, etc.).
Overall, this is great.
I tend to average between $1,200 and $1,300 per month – and I came in right under that upper limit without trying.
Looking toward May, I think it’ll be business as usual.
May does appear to be coming in a tad higher than April, though.
This will largely be due to a higher electricity bill. April is statistically the hottest month of the year here. It’s pretty brutal. That means more A/C usage.
Also, Oh’s been less busy. We’ve been spending more time together, particularly in the evenings.
It’s worth noting that I have a pair of leather wingtips that I wear pretty much every evening. They’re, probably, three years old now. I can tell they’re on their last legs. Not sure if it’ll happen in May or not, but a new pair of shoes is coming. So that’s some extraordinary spending that’ll show up at some point.
It also appears that my laptop might be starting to go. It’s more than four years old now. I’ll see how long I can stretch it, but I wouldn’t be surprised if I had to buy a new computer at some point in the next 12 months.
I hope all of you had a great April in terms of sticking to your budgets. It’s so important to manage those expenses, both before and after retirement.
Let’s continue to make the most of every dollar and every second!
I’ll quickly point out that there’s no visa expense in this report. I’m staying in Thailand on a one-year ED visa, which was settled earlier this year. As such, there are 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 on the essentials 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. Of course, I could spend less (especially on housing), but I have no desire or need to. Likewise, it’s easy to spend quite a bit more, but I equally lack that desire and need.
How was your spending for the past month? Did you meet your expectations? Why or why not?
Thanks for reading.
Image courtesy of: imgflip and Warner Bros. Pictures.
P.S. If you’re interested in becoming financially independent at a young age, which will involve controlling expenses, check out some amazing tools and services that personally helped me become financially free at 33.