Time to open up the books on how much money I spent last month.
Managing expenses is absolutely critical to becoming financial independent and retire 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 and retired 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 suddenly 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 dividend income from my FIRE Fund.
Average monthly passive income exceeds average monthly personal essential expenses.
That’s my definition of FIRE.
It’s a pretty wonderful life position to be in.
I’m very fortunate. And very grateful.
My overall passive income is north of $1,500 per month – and growing.
But 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 who’s achieved 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.
I’m living my best life these days. This is what it costs.
With that introduction out of the way, let’s get into my real-life spending for December 2019…
|Rent & Utilities||$541|
This expense report is somewhat special.
It’s the last spending report of both a year and a decade. It’s the last one for a while that reflects spending on two people, as I temporarily (and involuntarily) left Thailand at the end of December. And it’s also obviously the last expense report from Thailand for a bit.
I’m now in Kuala Lumpur alone, so future expense reports (for the next few months) will reflect spending on only myself in a totally different city.
I think this report came out pretty solid, overall.
Rent & Utilities came in just a bit high. That’s because I had to settle up with my apartment manager and cover electricity usage up until the day I left.
Otherwise, most recurring expenses were at or under long-term trends.
Everything across the board looks really great. And no major surprises, which is always nice.
The Travel spending relates to a plane ticket from Chiang Mai to Kuala Lumpur. And the spending on Gifts was due to Christmas.
Outside of those non-recurring expenses, I came out at just over $1,400 for the whole month. And that’s living what was truly a dream life for two people in Northern Thailand. The value for money in Thailand, especially Chaing Mai, is exceptional.
It’ll be interesting to see how things shake out here in Kuala Lumpur.
I suspect that I’ll end up spending less than I was in Chiang Mai. Kuala Lumpur is more expensive than Chiang Mai on most things I spend money on. However, the higher level of costs here should be offset by the fact that I’m now only spending on one person. This difference will be most noticeable in the Food and Amusement spending categories.
Frankly, I’d rather be back in Thailand with Oh and spending more money. But until we can get rid of her house, which then opens up all kinds of lifestyle and visa options for us, I’m basically in a holding pattern over here.
I originally came to Kuala Lumpur excited to explore and immerse myself in the local culture. Moreover, I thought that would open up all kinds of interesting avenues for new content. Unfortunately, Malaysian culture doesn’t sit well with me at all.
I’ve now turned on what I like to call “stoic mode”. This is a mode where I numb myself to whatever I’m going through and focus on an end objective. Everything else melts away and tunnel vision sets in.
I now see Kuala Lumpur as simply a short-term challenge to overcome. As such, I’ll end up spending less than I otherwise would have as I become more focused.
There’s always a bright side. Turning on “stoic mode” tends to simultaneously/accidentally turn on “frugal mode”. I see it as a win.
Let’s continue to make the most of every dollar and every second!
Please note that this report 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.