Time to open up the books on how much money I spent last month.
Managing expenses is absolutely critical to becoming financial independent and retire 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 and retired 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 suddenly 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.
I earn five-figure dividend income from my FIRE Fund.
Average monthly passive income exceeds average monthly personal essential expenses.
That’s my definition of FIRE.
It’s a pretty wonderful life position to be in.
I’m very fortunate. And very grateful.
My overall passive income is north of $1,500 per month – and growing.
But that’s not all.
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 who’s achieved 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.
I’m living my best life these days. This is what it costs.
With that introduction out of the way, let’s get into my real-life spending for November 2019…
|Rent & Utilities||$485|
*The Everything Else category includes expenses I don’t have a regular budget for. In this case, I bought a new pair of gym shoes and pants for my daily exercise. I picked up the gym gear while Oh and I were in Bangkok. To my dismay, the selection of gym wear in Bangkok was somewhat limited. And the pricing wasn’t as low as I would have liked to see. But since I walk everywhere, which means my shoes are basically my “car”, I’ll get my money’s worth.
I wasn’t able to find a pair of shoes to replace my leather wingtips that I wear every night. They’re pretty much worn out. I’ll continue looking. Bangkok just didn’t have what I was looking for.
Most of the spending in November actually came in at or below expectations, even though this was definitely the most expensive month I’ve experienced this year.
Seeing under $500 for Rent & Utilities is always nice, especially considering that’s for a luxury furnished apartment right in the center of town. And that’s with two people living in the apartment and consuming electricity. Pretty sweet.
Speaking of two people, it’s important to remember that these reports have been reflecting what I spend on a dream lifestyle for two people. That’s basically how it’s been since I relocated to Thailand, which was amplified when Oh moved in with me this past summer. I report passive income from one person, but I’m spending for two people. Essentials for only myself average about $1,100/month.
I’m surprised to see Food come in at under $500. That’s not too far off from my recent average. Yet we ate our faces off in Bangkok, had two airport meals in there, and were generally on the go for a while. I also splashed out on a nice meal for Oh’s family and friends toward the end of the month.
The spending on Coffee Shops came in low, too. That’s mainly due to the fact that I wasn’t as consistent with writing during November. I missed my coffee and writing while away, but it was nice to go on some adventures.
The Traveling Mailbox annual subscription renewal came in. It’s worth its weight in gold, in my opinion. A fantastic service.
Transportation was higher than usual in November. There were quite a few BTS trips in Bangkok in there. Oh and I also had to travel to/from airports in Bangkok and Chiang Mai, as well as take trips between Bangkok and Korat. $50 for that much transportation is impressive. That’s less than what many Americans spend on gas alone in a month. I love not owning a car!
One unfortunate surprise this month relates to the Travel category.
About $28 of that $121 was for a two-nights’ stay at a basic hotel just outside Korat. That was for the time when Oh and I were visiting her family in a very small town in Isan.
However, the rest of it relates to a hotel mishap in Bangkok.
I originally booked us a stay at a budget hotel just off of Sukhumvit, outside of the main strip. Ran about $30/night for three nights. But it was a total nightmare.
Between inoperable A/C, a shower that only offered ice cold or blistering hot water, an ant infestation, and a generally disgusting level of cleanliness, we had to cancel the remainder of our stay after the first night and go elsewhere. I applied the ~$60 credit toward a two-nights’ stay at another, more upscale property closer to the center of Bangkok. Booking at the last minute like that isn’t cheap, and that’s where the other ~$93 in Travel spending comes from. It was worth whatever it took to stay somewhere else for those two nights. Yeah, it was that bad.
Now that our Bangkok/Isan trip is all wrapped up, things should start to normalize. I think December will be straightforward.
There will be some expenditures related to Christmas.
I also have to pay for a plane ticket out of Thailand – I’m leaving soon.
Besides that, it looks like smooth sailing.
I hope all of you had a great November 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.