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 January 2019…
|Rent & Utilities||$466|
*Everything Else includes expenses I don’t have a regular budget for. In this case, I bought a hat.
Oh bought me a really nice Nike Dri-Fit hat for Christmas. She thought it’d be a good idea to wear a hat in the daytime to protect my head from the sun. I like wearing that hat so much, I bought a casual hat to wear on off days and evenings.
So I’m back on track after last month’s blowout.
Most everything across the board was roughly in line with expectations.
Overall spending was just a tad higher than usual, with most of the increase coming in the Mobile Phone and Transportation categories.
That additional spending can be traced back to two trips that transpired in January.
First, there was the traveling back from Bangkok on January 1st. We had to get to the airport in Bangkok, then we had to get ourselves back to our apartment from the Chiang Mai airport when we got home. I elected to use public transportation for all of this, but it adds up.
Second, there were transportation costs related to the trip to Ho Chi Minh City, Vietnam to get my visa for Thailand. Again, I used public transportation whenever possible.
And the Mobile Phone budget line was higher because I had to purchase a tourist SIM card and data while I was in HCMC.
Otherwise, I’m pretty happy with where things came out here. No major surprises.
I want to fill you guys in on something, though.
I noted during last month’s expense report that I was going to look into finishing my laser hair removal. The purpose of this being to reduce the time and costs related to daily shaving, which was the purpose of getting laser hair removal in the first place. (If the process had been carried out as promised, I’d be in a great spot right now. Unfortunately, the US clinic over-promised, under-delivered, and went out of business.)
Well, I went ahead and had a local clinic quote me a package. It was 17,500 baht (~$560) for six sessions of laser hair removal on my face. They felt confident that most of the hair would be gone after six sessions.
I’m 50/50 on going through with this.
If I knew, for sure, I’d have 99% or so of the hair on my face gone for $560, I’d jump on it in a heartbeat. It’d be a phenomenal investment.
But my poor experiences thus far with laser hair removal has made me skeptical. I don’t want to throw good money after bad. I do spend a considerable amount of money on shaving gear every month, and I’d love to reduce that. It’d be great to get rid of the whole process. But I don’t want to waste over $500 in the pursuit of that.
With that update out of the way, I’ll note that spending should be more or less fairly normal over the next few months.
I’m already more than halfway through February’s spending. Things look great thus far. I anticipate being a good bit below $1,300, due in part to the fact that there are only 28 days in February.
That said, I’m waiting for my iPhone 4S to finally bite the dust. It’s on its last legs. I’ll have to buy a new phone sooner rather than later.
Beyond that, I’m looking forward to the rest of the year. I really am. I’ve never felt better. And I’ve never been happier. Life is truly a dream. I’m blessed beyond belief.
I hope all of you had a great January 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.