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.
I earn five-figure and growing dividend income from my FIRE Fund.
Dividend income covers my essential expenses.
It’s a pretty wonderful life position to be in.
I’m very fortunate. And very grateful.
My overall passive income is north of $1,400 per month – and growing.
That’s not all.
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 August 2019…
|Rent & Utilities||$556|
So this month came in a little bit high.
I find myself typically spending somewhere between $1,300 and $1,400 per month these days. Keep in mind, that’s for an amazing lifestyle with no limitations. For two people.
What happened in August was a higher-than-average electricity bill and some excessive spending in the Food category.
The former should automatically start to ease by virtue of the weather cooling down here in Chiang Mai as we start to exit the rainy season and enter a really wonderful stretch from about October through March. Less usage of air conditioning will be a nice tailwind for the budget.
On the other hand, I have to confess that I’ve found myself eating slightly less Thai food as the months have worn on.
I still eat Thai food every day for lunch. Since I only eat two meals per day, that’s automatically 50% of my diet right there.
But I’ve been mixing up dinner a lot more since I first arrived in Thailand. Whereas Thai food constituted ~90% of my diet a year or so ago, I’d say it’s down to about 75% nowadays. I’m simply eating more Western and international food, which costs more than local food.
I don’t suspect this will change much, because I don’t find myself particularly interested in changing it. I love Thai food. But I do enjoy some variety.
Beyond that, I think most spending was more or less in line with expectations and norms.
I was supposed to buy a new pair of gym shoes in August, but I couldn’t find a pair I liked in my size. I’m a size US 11, which is quite large by Thai standards. I’ll keep looking. But this might have to wait for the right opportunity.
That opportunity will likely present itself in November. Oh and I will be traveling to Bangkok and Isan in late November to have a good time and visit some of her family. Bangkok’s shopping options are out of this world. I won’t have a hard time finding shoes there, so I might just wait until our trip in November to pick up a new pair of Nikes.
Speaking of travel, Oh and I also plan to visit Kuala Lumpur in January.
I’ve been interested in exploring KL for quite a while now. It’s one of my top SE Asian cities for early retirees.
I just so happen to need a new visa in January. Kuala Lumpur just so happens to be a convenient place to get this visa. That worked out swell. I’ll be talking more about the visa situation very soon.
Due mostly to the aforementioned traveling, the next few months will produce some budget-busting results.
In fact, I anticipate elevated spending for the remainder of 2019.
That’s okay. I didn’t move to Thailand to live super cheaply or adhere to a strict budget. I came here to get more life for less money. And it’s been working out tremendously well thus far.
I already know September’s spending is going to come in high because I had to ship in some high-quality shaving supplies that I tend to stock up on once per year. Unfortunately, I experienced a shipping mishap. One that ended up costing me more money than I planned on spending. I’ll detail this saga in next month’s expense update.
Besides that episode, September is shaping up to look a lot like August.
I hope all of you had a great August 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.