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 January 2020…
|Rent & Utilities||$651|
*The Everything Else category includes expenses I don’t have a regular budget for. In this case, it was a new computer bag. The $10 bag that I picked up in Chiang Mai a while back had one of its handles break on me while I was walking down the street. Didn’t have much time to shop around. I picked up the cheapest, nicest briefcase I could find in the area I was in.
This expense report will be a one-off.
What you see above encompasses most of the money I spent in Kuala Lumpur, which is a place I despise and left in early February after my Airbnb host got physical with me.
This report is unusual in two ways.
First, I was alone. So this spending reflects what I spent only on myself. On the other hand, I’m often spending for two people when I’m home in Chiang Mai.
Second, this was a totally different city. I’ve never been to Kuala Lumpur before. And I’ll never go back. But I think it’s interesting to see what life costs somewhere else. I got a good glimpse of Kuala Lumpur’s cost of living.
On that note, I’d say that Kuala Lumpur, in terms of prices, runs somewhere between Chiang Mai and Bangkok. It’s definitely more expensive than what I’m used to in Chiang Mai. But I think life there runs slightly less than in Bangkok. However, the value for money in Bangkok is light years ahead of Kuala Lumpur. I don’t see how the quality of life in the two places is in any way comparable. The two cities may as well be on different planets.
With that in mind, if I were living this same exact lifestyle in Chiang Mai, I would have spent less than $1,000. The 30%+ difference represents the higher COL in Kuala Lumpur. I had a pretty spartan lifestyle while I was there.
There’s not too much to break down here.
I spent a lot more on the Rent & Utilities category than I usually do. That’s because I was using Airbnb. If you were to live in Kuala Lumpur and rent a place outright, I did see some decent places going for less than $600/month. I rented a room in a two-bedroom condo.
That said, it’s nice to be back in Chiang Mai. Oh and I signed a lease on a beautiful one-bedroom condo and got a great deal. Rent & Utilities will be much less than this for the rest of 2020. I’ll be discussing the condo soon.
The spending on Coffee Shops was higher than expected. This is because coffee is both expensive and low quality in Kuala Lumpur. I get a delicious iced coffee in Chiang Mai for 75 baht. A barely drinkable iced coffee in Kuala Lumpur runs 15 ringgit and up.
The other category that came in high was Gym. There was only one gym in my neighborhood. And it was both super expensive and low quality (the overarching theme of Kuala Lumpur). I signed a three-month package (the shortest they offered), which averages out to ~$48/month. Since I left in early February, I’ll go ahead and recognize the remainder of the gym contract in February’s spending report. Thus, the spending on Gym in February will be extremely high, as I’ll also have to recognize the spending related to my new membership in Chiang Mai.
The rest of the categories came in pretty low.
Notably, I spent much less on Food than I usually do in Chiang Mai. Again, that’s because I was alone the whole time. When Oh comes to eat with me, I pay her way. So that does make a difference.
January will probably go down as one of the cheapest months I have all year. But I’m much happier now that I’m back in Chiang Mai, living the lifestyle I love, and spending more money.
Honestly, I wouldn’t live in Kuala Lumpur for free. I chased after and achieved FIRE to be happy and live precisely the life I want to live, not to count beans. My life hasn’t revolved around money for many years now. Living the life you want, regardless of the cost, is true freedom.
That wraps things up for the one-off spending report from Kuala Lumpur.
Looking toward February, I can already tell you that next month’s spending report will reflect significantly higher expenses.
Primarily, there’s the spending related to a new laptop. My five-year-old laptop finally gave up on me. There were also costs related to a hotel room in Kuala Lumpur and a flight back to Chiang Mai. Valentine’s Day and Oh’s birthday is in there, too. And I had to extend my visa exemption for Thailand.
Just as January was unique, I think February will be somewhat unique in the sense that it’ll likely be by far the most expensive month I’ll have all year. There are a number of unusual expenses in there.
Either way, I’m happy to be back in Chiang Mai. I’m back to living the lifestyle that I always wanted. This is why I sacrificed and worked so hard to achieve FIRE.
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, investing, 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.