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.
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 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 August 2018…
|Rent & Utilities||$467|
This was a bit of a blow-out month. Definitely one of the most expensive months I’ve had since relocating abroad.
That’s kind of funny to say, considering I would have been pleased as punch with being able to spend this much (or this little) back when I was living in the US and marching my way toward FIRE. But, my, how things have changed.
Nonetheless, the excess spending was mostly at my direction, although an unforeseen issue caught me by surprise and caused a minor bump to spending this month.
That unforeseen issue was losing my debit card after an ATM didn’t properly return it.
It’s one of those nightmare scenarios that expats, travelers, or digital nomads wish to never experience.
That said, it wasn’t really a big deal. After calling the Thai bank and realizing the card would be shredded, I promptly called my US bank to cancel the card and get one shipped to me.
Where I made a baffling mistake with this, though, was in how I handled the mailing of the debit card.
So I shave my head and face (against the grain) twice daily. And I have to use a special shaving oil product to limit irritation to my skin. I ran out of this product (from what I brought with me when I moved here), and I can’t find it here in Chiang Mai. I decided to order a new batch from the US, have it sent to my virtual mailbox at Traveling Mailbox, then have the package forwarded to me here in Chiang Mai. Simple.
This is why you see the massive spending on toiletries this month – there was first the purchasing of about a year’s worth of shaving oil, then the shipping charges to have that package forwarded internationally.
However, I exacerbated the spending by compounding the issue.
For some unbeknownst reason, I had just assumed that Schwab couldn’t send me a new debit card directly. I thought I had read somewhere that they only mail new debit cards domestically. So I had them ship the debit card to my virtual address, upon which time I’d have it added to my shaving oil package and have the whole thing forwarded in one shot.
I thought I was being super clever and killing two birds with one stone.
Well, I was being dumb.
I called Schwab a couple days later after revisiting my thought process on this one. I wanted to ask them if they do, indeed, mail debit cards internationally (just in case this ever happens again).
They do. Cue the sinking of my heart.
So I wasted time by having it rerouted and then forwarded, which isn’t good when that’s basically my lifeline to cash.
And then I wasted money because I ponied up for express shipping (once it arrived to my virtual mailbox) – I was in dire need of that card. And I was paying express shipping on the entire package (including the original shipment of shaving oil), obviously.
All in, it ended up costing me an extra few days and about $30 (the difference between standard shipping and express). Learned my lesson, though, just in case this ever happens again. Let’s hope it doesn’t.
Also, I spent just a tad more in general because I was concerned about how long it might take for the debit card to arrive in Thailand. Since I was relying solely on whatever cash I had on hand, I was attempting to make that cash last as long as possible. This meant using my credit card more often than usual, which in turn meant visiting facilities (restaurants, mostly) that catered to Westerners and credit cards (read: higher prices).
For reference, it took exactly seven days for the package to travel from my virtual mailbox to my apartment. Not bad!
Getting past that, you’ll also notice the huge spending on gifts.
Well, that can be traced back to someone quite close to me running into an emergency of their own. They explained the issue and made a reasonable request of me. I then chose to step up and help. I wrote it off as a one-time gift, which is fine by me.
I regularly take care of people close to me in certain ways, which is why I have a budget line for this stuff. It’s just that this month was abnormally high due to an extreme circumstance.
Otherwise, it was business usual for the most part.
Looking forward, though, I do anticipate higher spending over the next few months.
There are a number of events that will precipitate this.
Oh and I have decided to travel to Bangkok in late December for the holidays. We’re super excited about that. We visited Bangkok earlier this year, but we only stayed for a short time. We’re going to stay for six days (and five nights) this time around to do more urban exploring (and eat our faces off).
There will be some travel spending related to this. But a long-time reader, and friend, was gracious enough to offer some help with the BKK trip after he heard about our plans. I’ll reveal more about that in an upcoming expense report.
Also, my annual subscription to Traveling Mailbox is coming due soon, so that’ll be popping up.
Then there’s the one-year anniversary that Oh and I will be celebrating soon. We’re not going crazy or anything, but a small gift and a pleasurable dinner is in the cards.
Moving out beyond that, even early 2019 will be affected by the renewal of my visa and the planning of our first big international trip together. The long-term plan (as of right now) is to become a bit of a snowbird and extensively travel out of Thailand during the hottest time (usually around April). We might start dipping our toes into this idea in 2019 with some initial baby steps.
On top of all of this, it seems like my laptop and iPhone 4S are on their last legs, respectively. New electronics will probably be needed within the next six months.
Life is great, guys!
I’m coming up on a year since I indefinitely relocated abroad to take advantage of geographic arbitrage, improve my overall quality of life, become free from money itself, and live out my early retirement dreams. It’s been amazing. I’m excited to put together a one-year recap soon and reminisce about my first year as an expat.
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 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. 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.
How was your spending for the past month? 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.