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 spending 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 March 2019…
|Rent & Utilities||$471|
*Everything Else includes expenses I don’t have a regular budget for. In this case, I spent just over $100 on renewing my Florida driver’s license and then having it forwarded to me in Thailand. I didn’t want to do this, but I had no choice. My credit card was flagged for fraud and required me to upload a copy of a valid license in order to prove my identity. I also spent just under $230 on a new smartphone after my iPhone 4S finally bit the dust.
Overall, I’m pretty happy with my spending this month.
Most major budget categories were actually right in line with where I came in at last month, which was one of the “cheapest” months I’ve ever had. Plus, March had three extra spending days.
But a few unexpected expenses pushed the total much higher than usual.
There are the lows and the highs. Unexpected expenses pop up from time to time. The unexpected should be expected. That’s just how it goes.
I also spent quite a bit more on Gifts this month. That’s because we celebrated Oh’s birthday in early March. I gave her a small gift that she was thrilled with.
Outside of the license and phone, though, I’m pleased. I’m not in any way attempting to live frugally or otherwise cut back. I’m out here living the life of my dreams. And I’m spending for two people since I voluntarily cover Oh’s way whenever we’re together (which is most of the time). My dream lifestyle doesn’t cost much simply because of who I am, what I desire, and where I live.
The license had no wiggle room. It costs what it costs.
However, I feel like I came out okay with the phone after shopping around a bit. I can’t recall exactly how much I spent on my refurbished iPhone 4S way back when, but I don’t think it was much less than this. Maybe $175. Getting a new phone with much better technology, years later, for not much more money, is awesome.
This is only the third smartphone I’ve purchased since 2008. That goes back to the iPhone 3G I picked up when it was released.
Looking toward April, I suspect I’ll be back to a normal range of spending. Halfway through the month, I can see that things are looking swell. I should come in roughly between $1,200 and $1,300. Back to the long-term average.
I don’t have any trips planned. And I don’t see any major bumps in the road. Should be smooth sailing ahead. Of course, storms are always possible. But I’m prepared. So it’s all good.
I do know the gym membership will be lower for the next few months because my gym was running a promotion. 15% off for memberships. I was due a renewal at the end of March anyway, so that was perfect.
But rent will be a bit higher because I’m running the air conditioner more often. It gets mighty hot in Chiang Mai this time of year.
I hope all of you had a great March 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.