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 simply 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 even really 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.
My basic expenses in life are covered by passive income.
I earn five-figure and growing dividend income from my FIRE Fund.
And I have passive online income like royalties from my two best-selling books: The Dividend Mantra Way and 5 Steps To Retire In 5 Years (also available in paperback).
All in, passive income is north of $1,300 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 chasing after financial freedom).
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 regular, everyday life which is underpinned by passive income.
Moreover, my everyday life is fun, free, and functional. It’s completely delightful. It’s customized for me and by me. There’s no sacrifice. I don’t ever wake up and feel like I’d be much happier if I spent a lot more money. That’s not how happiness works.
While my ability to live on relatively little and be very happy and fulfilled 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.
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 July 2018…
Rent & Utilities | $485 |
Food | $410 |
Health/Personal/Toiletries | $170 |
Coffee Shops | $85 |
Amusement | $32 |
Gym | $28 |
Transportation | $26 |
Mobile Phone | $16 |
Gifts | $11 |
Everything Else* | $17 |
Total: | $1,272 |
To track and manage your expenses, I recommend Personal Capital and Mint.
*Everything Else includes expenses that I don’t have a regular budget for. I picked up a pair of headphones after my old pair completely broke. And I also bought a T-shirt. I’ve lost a few shirts lately. Two became very stained. And one flew off of my balcony during drying. Seeing as how I have a minimal amount of clothing, I have to replace lost articles pretty quickly. And with most of my remaining clothing old, I’ll probably have to start buying new clothes soon.
Boy, I was on track to turn in one of my best months since relocating to Chiang Mai. I was set to come in under $1,200 this month, but my decision to revisit my minor health affliction ended that. Oh, well.
I also became quite ill early on in the month. I caught some kind of flu, which later turned into bronchitis and a lingering cold for a good two weeks or so. My girlfriend also got sick (there was a virus going around over here). So we didn’t spend as much time as usual together, which limited some of my expenses to a degree.
That meant a little less time at the coffee shop and a little less time out and about.
But we decided to go all out on the last day of the month, celebrating finally feeling better and 10 months together with a huge spread of sushi. That was awesome.
Otherwise, everything else was business as usual.
As I’ve noted a few times now, one of my favorite things about living here isn’t just the low cost of living, but it’s the fact that it’s so reliably cheap across the board. My expenses barely budge from month to month.
Even with a visit to the hospital and an ultrasound in July, my expenses this month looked awfully similar to every other month. That’s just how it is over here. It’s hard to have some kind of major shock in terms of expenses. That makes it really easy to budget and plan one’s FIRE out.
Overall, I’m happy with this month’s spending. I’m living a full life, my best life, for very little money. I’m incredibly lucky and very grateful.
I’ll quickly point out that there’s no visa expense in this report. That’s because I’m staying in Thailand on a one-year ED visa, which was settled earlier this year. As such, there’s very 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 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. I could spend less (especially on housing), but I have no desire or need to. I could also spend quite a bit more, but I equally lack that desire and need.
How was your spending for July? Did you meet your expectations? Why or why not?
Thanks for reading.
Image courtesy of: Stuart Miles at FreeDigitalPhotos.net.
P.S. If you’re interested in becoming financially independent at a young age, which will involve controlling expenses, check out some amazing resources that personally helped me become financially free at 33.
Hi Jason,
Excellent post, I wanted to know if you can use Personal Capital to track your expenses outside the U.S. for some reason Personal Capital page don’t load in Europe. Do experience the same problem in Thailand.
ATM,
As far as I understand, PC isn’t available for European customers. I signed up for all of my American accounts long before I left. And I’m still a US citizen.
Cheers!
Thanks Jason for the clarification.
You could possible use a virtual private network like Tunnel Bear. Choose a secured network in the States will trick the network to thinking you are in the States. Go to the resources link at the top of Jason’s website and there is some info on Tunnel Bear there.
IP,
That would be a good strategy for someone like myself who’s just accessing American accounts abroad, but I don’t think it would work for a European. You can’t link European accounts (as far as I understand), which makes PC almost useless. It’s not set up for people outside of America. It’s the setting up of accounts that would be a problem, not the accessing of something from anywhere.
Cheers.
Hi Jason great job on the expenses, glad to hear your feeling better 🙂 Its been a while since I have checked in here. Ive been off enjoying a life of leisure, my wife and I spent some time at the beach and Epcot.
I have been using my extra funds to add to my new portfolio and am having fun with my investing again, I’m sure it will be a new life time activity as I really did miss doing the research and watching a new account grow on a regular basis as the dividends rolled in ( my main accounts are all direct investment accounts so not much to watch ).
Keep up the great work and have fun 🙂
Bob,
Hey, that’s great. Enjoying life is what it’s all about. If you’re not out there living your best life, I’m not sure what the point of all of this would be. 🙂
Best wishes!
Hi Jason,
I’ve asked on your “Expenses for March 2018” post of your experience with numbeo.com and if the figures from Chiang Mai are accurate enough which you said are pretty reasonable.
One thing that I’ve noticed comparing second tier cities from Eastern Europe with S-E Asia ones is that in S-E Asia eating out is extremely cheap and if one buys food from the local market and cooks it at home won’t make a huge difference for the total monthly food cost. All the other categories looked pretty much the same, some being cheaper in Eastern Europe like Internet/Phone.
I’ve seen most expats and digital nomads that live in S-E Asia eat out around 75-90% of the time.
In Eastern Europe to have the same total monthly expenses one has to eat out around 30% of the time assuming all the other categories remain the same as living in the centre, having a gym membership, using local transport etc.
So, if one likes the Eastern European, Balkan vibe better and doesn’t mind eating out “only” a third of the time this is an option to consider, especially if you had private cooking lessons from Jamie Oliver (using YouTube of course).
TheJoneses,
Yeah, you’re definitely right on eating out. But I’d peg the number closer to 100%. Even the locals rarely cook. My girlfriend has a house with full kitchen, yet I’ve never once seen her cook food. It’s just a totally different culture/dynamic over here. Frankly, I prefer it. But to each their own. Some might prefer cooking/eating at home more.
Eastern Europe has some solid options for long-term expat living, too. You’d just have to weigh out the pros and cons against other opportunities.
Best regards.
Have you plans to learn local language there?
I have noticed that few of American expats here in my home country that I know have been little lazy learning local language even after living ten years or so in the country. Most people speak english but both of them have some regrets because of this. You get easily that outsider feeling otherwise
James,
Yeah, good question. I’ve learned enough to get by. I can say hello, order food, say thank you, etc. The Thai language is obviously extremely different to anything a Westerner would be familiar with, but I’m actually quite surprised that I’ve learned as much as I have. However, I have no plans to ever become fluent. I’m not good at learning foreign languages, and I see it as more intelligent to allocate one’s time most efficiently:
https://www.mrfreeat33.com/i-suck-at-most-things/
All that said, almost every single Westerner I’ve met over here neither speaks a lick of Thai nor eats any of the local food. They refuse to learn how to even say “hello” in Thai, and they eat McDonald’s. Strange to me, but to each their own.
Cheers!
Thanks for sharing, Jason! I’m a big fan of posts that track expenses. It’s really helpful for those pursuing financial independence through dividend investing down the road. It’s great to know what type of lifestyle is possible. In regards to my expenses, my headphones broke recently too, so I had to buy another pair. My expenses were average overall this month. I need to do a better job of tracking them to know exact numbers. Thanks for sharing and good to hear you’re feeling better. Have a great week!
RTC,
Thanks, man!
Yeah, tracking is so, so important. While I’ve “been there, done that” in terms of posting my expenses for the public to see on my way to FIRE, what really got me excited about doing these again is to dispel any notion that you just stop doing it after FIRE. It’s arguably even more important to keep track of things once you quit your job because you probably lose that big buffer you used to have. The last situation you’d want to find yourself in is, perhaps needing a job again because you got lazy with managing the finances.
Have a great week over there, too. 🙂
Best regards.