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 lifestyle 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 December 2018…
|Rent & Utilities||$464|
Boy, that’s about as much as I ever spend in a single month.
I’ve been guiding for this blowout month for some time now. I knew December was going to be more expensive than my usual average because there was an expectation for the large expenses. They were coming down the pike.
The main difference between this month and most other months, of course, is the Visa expense line. As I note in the bottom of every expense report, I handle and pay for my ED visa once per year. I always include a blurb that states that you can add an average of about $100 or so to every month’s expenses because of the annual costs of maintaining the visa.
I typically spend between $1,200 and $1,300 per month on my life here in Chiang Mai. But adding in the $100 brings things up to $1,300 to $1,400. That’s slightly under monthly passive income.
You can see those annual visa costs come through this month.
There’s the $1,087 that I spent directly on the visa and related program itself.
Then there’s the $223 Travel expense line. The majority of that is related to the airfare and hotel for my stay in Ho Chi Minh City, Vietnam. I’m traveling to a Thai Consulate there to process my visa. I’m in HCMC as I write this.
So I spent a total of ~$1,278 to acquire my visa for another year. That averages out to just over $100/month.
I’ll have some incidental costs while in HCMC, like transportation to/from airport. Stuff like that. But this accounts for most of it. (I’m keeping costs down, though. Taking a bus into the center of the city for less than a buck isn’t bad.)
In addition, Oh and I traveled to Bangkok in order to ring in the New Year and celebrate the closing of an amazing 2018.
I consequently spent more almost across the board as a result.
The Food expense line in particular was substantially higher than usual.
Food in Bangkok is more expensive right off the bat. Plus, we were eating more international food than usual. That exacerbated the increased spending.
I was especially interested in Bangkok’s international food offerings just to experience it. And it’s honestly nice to take a break from the usual Thai food.
Furthermore, I spent more on Transportation because we were using the BTS a lot down there.
Bangkok is very spread out. So it’s almost impossible to walk everywhere, like we do in Chiang Mai. The BTS trips are cheap on a per-trip basis. But it adds up quickly when you’re zipping across town repeatedly.
The Coffee expense line was also higher than usual.
That’s because cheap, independent coffee shops aren’t easy to find in Bangkok. Starbucks is everywhere. I love that as a shareholder, but the coffee runs more than twice what I pay in Chiang Mai. So that strained things as well, even though we weren’t in coffee shops as often as usual while we were in Bangkok.
However, this trip could have been a lot more expensive.
Fortunately, my friend and reader Andrew from massagestore.com gifted Oh and I a five-night stay at The Athenee Luxury Hotel right in central Bangkok. It was an amazing Christmas gift. I called him out on Twitter for this, where you can see pictures of the facilities. Really can’t thank him enough, but I’ll do it once more. Thanks, buddy!
If you strip out the visa and related expenses, I spent ~$1,560. That’s not bad at all when you consider that we went crazy (relatively speaking) in Bangkok for almost a week.
Looking forward, I suspect January will be back to normal. That is to say, I anticipate spending somewhere between $1,200 and $1,300 on my entire life – which is an enjoyable and carefree lifestyle for two people.
I don’t see any major bumps in the road on the horizon.
The only thing that might cause a slight increase in spending is the trip to Vietnam. There will be some costs to move myself around the city. But local food is quite cheap, just like in Thailand. I’m looking forward to downing my fair share of banh mi sandwiches!
Nonetheless, I don’t anticipate being wildly off of my long-term average.
Looking out over the course of 2019, I’ve already noted that I might be traveling more than usual. That would increase expenses for sure.
Beyond that, I’m considering finishing up the laser hair removal I started years ago. If there’s one area of my spending that irks me a little bit, it’s how much money I spend on razors. I’d love to spend/waste less time and money on shaving. There’s also a vanity side of it – it’d be great to get rid of this patchy hair growth on my face. My skin is extremely sensitive. And I have numerous skin conditions that require careful shaving with the best products I can buy. I’d love to eliminate this whole process altogether.
It was another successful and enjoyable month in FIRE. Truly couldn’t be more blessed or fortunate.
I’m incredibly excited for what 2019 holds in store for all of us. The year is already getting started off strong here in Thailand. I’ve been busy creating some fantastic content, hitting the gym, meeting new people (like Joe from Retireby40), and enjoying the cooler weather.
I’ve never felt better about my financial, physical, or mental condition.
Let’s make the most of every day, guys!
Keep in mind 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.).
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.