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 May 2018…
|Rent & Utilities||$518|
*Everything Else includes expenses that I don’t have a regular budget for. In this case, it was two small umbrellas. My girlfriend and I both owned larger umbrellas that I thought were too cumbersome to carry around the city. So I picked up two very small umbrellas that roughly fit in the palm of my hand.
My expenses these days are extremely consistent. I’m coming in at somewhere between $1,250 and $1,300 per month, just about every month. Some things go up a bit. Some go down. And the exchange rate impacts things to a negligible degree. But this consistency is something that makes planning and FIRE very manageable.
As I’ve noted before, this level of consistency was always tough for me in the States. That’s because of the different cost structure. One minor unexpected issue in the US can cause a significant disruption to one’s spending. But everything is so cheap over here, it’s hard to really run into any big surprises.
Rent was a touch high this month, though. That number includes electricity, which is what caused the number to spike. I ran A/C a lot in April (with that usage reflected on May’s bill). Like, really a lot. That’s because it was hot here in Chiang Mai. Like, really hot. But Oh, my significant other, brought a fan into the apartment, which has really helped moderate the inside temperature, air flow, and overall comfort level without using the A/C too often in the living area (although we still use the A/C quite a bit at night when we sleep).
The rest of the spending was more or less within expectations. I spent a bit much on toiletries, but I’m glad to report there was a sale on Fusion razors during June. So I really stocked up on those (helping lower July’s expenses). Razors account for the majority of that expense category.
But food was surprisingly light this month. I believe that’s the least I’ve spent on food since I got to Chiang Mai. I wasn’t trying to spend less, but it’s neat to see that I came out where I did. The food spending, as I’ve shared before, is practically for two people, as I pay for Oh and I whenever we go out to eat (she’s with me much of the time).
It was another month where I lived to the fullest in every way imaginable. I never once made a decision based around spending or cost. I just went about doing what makes me happy, and the amount you see here is the cost of that.
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 May? 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.