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 May 2019…
|Rent & Utilities||$526|
*The Everything Else budget category includes expenses I don’t have a regular budget for. In this case, I purchased some socks.
Another month of living the dream in Thailand. Couldn’t be more blessed, especially considering how little it costs for me to live my early retirement dream life.
I typically spend between $1,200 and $1,300 per month. Keep in mind that’s living full-out, with no limitations, for two people.
It’s quite extraordinary.
Living this same lifestyle in a fairly large and dynamic city in the States would easily cost at least three times as much. It’s pretty amazing to think a simple plane ticket can turn you into a millionaire.
So this month did come in a bit high.
Examining the numbers a little closer, the higher-than-average electric bill definitely boosted the overall spending.
It’s extremely hot in Chiang Mai from late March until early June. This is the time of year in which I happen to use the A/C more frequently than usual.
Also, it appears that we had a lot of fun. At least, that’s what the Amusement spending is telling me.
Not much I can say here. We enjoy ourselves. An occasional drink, regular visits to the movie theater, massages, etc.
Although both of us are homebodies at heart, and neither of us are into partying, I’m always willing to pull out the wallet if we decide to go somewhere and do something that costs money.
Beyond that, most everything else was roughly in line with what I’ve been seeing over the last year or so.
Looking forward, it appears that June is going to come in a bit lower than May.
Heavy A/C usage continues.
However, Oh and I have been spending limited time together throughout June.
She’s been very busy at work. And she’s working on a project (which I’ll talk about soon) that has been occupying most of her free time. That means I’ve paid for two people less often than I usually would.
One area of my spending that has been bothering me for a while is the Health/Personal/Toiletries budget category. I’ve mentioned this before. It might finally be time to actually blow off some dust and flex some frugality muscles again. Haven’t done that in years, but I believe this is an area of my spending in which I could be more efficient.
I do have some limitations, though, which is why it’s been so high for so long.
First, I have extremely sensitive skin. I suffer from a number of skin conditions, which makes it difficult to get away from expensive skincare products.
Second, I shave my entire head and face – against the grain – twice per day. The amount of time and money I spend on shaving has been irking me for years. The laser hair removal I pursued about 15 years ago was designed to fix this, but it didn’t work out. I’m thinking about doing laser again and eliminating most of the facial hair that’s left. I’ll make a decision on this within the next few months.
Meanwhile, I started using Retin-A after a consultation with a dermatologist. It’s super cheap and doesn’t require a prescription over here. I think this might give me a little leeway with the other products. My skin now looks better than it has in years, so I might be able to do away with some of the expensive cleansers that I use. I’m going to be experimenting with my spending in this area very soon.
I hope all of you had a great May 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.