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 best-selling book. 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 March 2018…
|Rent & Utilities||$464|
The Everything Else spending was related to a new computer bag I picked up during March.
Spending less than $1,300 for a life that is carefree and without any measure of real caution or sacrifice is pretty incredible, all in all.
To give some context to this, I’m confident this same lifestyle, if it were to be lived in the US, would require a seven-figure portfolio’s passive income. As such, moving abroad has turned me into a millionaire, relatively speaking.
Paramount to my relatively low spending is my furnished one-bedroom apartment. This apartment would be four times or five times more expensive in an equivalent city/area in the States. Since housing is the largest single expense for most of us, maximizing this area of your life sets everything else in motion.
I’m eating out for every meal, which is almost exclusively delicious and healthy Thai food. This is very different from my life in the States, where I was rarely eating out of the house. Instead of PB&J at home, it’s pad kra pao at a market. Works for me.
I’m at the coffee shop – my happy place – at least six days per week. I’m able to be at the coffee shop twice as much as I used to be because it costs half as much to go. And I’m able to enjoy it more when I feel like I’m getting a good value. It’s tough to enjoy a small coffee when it costs $4.50. It bums me out a little bit.
And my disposition has become much more gregarious and outgoing since moving here, which has translated into being out of the apartment more and thus spending more on entertainment.
This month was a bit notable due to some travel. My girlfriend and I spent a few days at Koh Samui in March, where food and transportation are significantly more expensive than in Chiang Mai. I spent slightly more than I otherwise would have as a result of that.
Also, keep in mind that I’m regularly paying for two people, particularly on food, as I don’t ask, want, or need my significant other pitching in on fried rice. But if I were single and spending on just me, I would have came in closer to $1,000 (with most of the savings being on food and amusement) total for March.
Toiletries were awfully expensive this month. For some strange reason, I went through razors like crazy. I’m hoping I have better luck in that department in April. If my laser hair removal would have been successful, I could almost completely eliminate razors from the budget (and the associated time for shaving), which would be really nice. I may actually look into completing the laser hair removal here in Thailand. I believe it’ll be much cheaper here.
Of course, there was also the hospital visit during the month of March.
Overall, I’m quite pleased with this level of expenditure. This is for a full-out life that has no compromise.
But I say that with my own perspective on compromise and sacrifice. The lifestyle I love to live might seem very spartan to some; it might seem luxurious to others. However, that doesn’t matter at all. All that matters to me is that I’m happy.
The US dollar has lost a little strength since I moved here, making things here in Thailand a touch higher when I convert my dollar into baht. But it’s negligible.
I’ll also note that there’s no visa costs 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 March? 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.