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 October 2019…
|Rent & Utilities||$546|
The only real bomb this month was the spending on Travel.
As I noted in last month’s expense report, Oh and I are planning to travel to Bangkok and Isan in late November. I decided to book our flights and hotel stay in late October, so the majority of the spending related to that trip is shown above.
The $233 covered two round-trip flights to Bangkok and back, as well as a three-nights’ stay at a very nice Bangkok hotel located right off of Sukhumvit. I think that’s a pretty good deal.
Travel in and around Southeast Asia is a lot cheaper than it is in the States, which is one of the benefits of living here.
Beyond the Travel spending, the $199 on the Health/Personal/Toiletries spending category was high.
What happened here was a bit of a mistake on my part regarding lotion. I have extremely sensitive skin, and I also have a number of long-term skin conditions that can be almost debilitating at times. Something I was born with.
Anyway, I’ve long used Eucerin lotion at the direction of a dermatologist. But Eucerin apparently no longer makes the lotion I’ve been using (or Thailand no longer imports it). So I picked up a bottle of the new stuff Eucerin is putting out (called pH5). But it was horribly greasy and basically unusable.
I then tried some other stuff, but that was even worse.
I finally settled on Cetaphil lotion, which is great. I’m back in business.
Unfortunately, I wasted over $40 on the other two bottles of lotion. Expensive stuff. They’re imported products that have a specialty nature to them. It’s not often that I totally waste money like that, but stuff happens.
Otherwise, I think this month was pretty solid across the board.
Factoring out the spending related to our November trip, total expenses came out to under $1,500. That’s right in my wheelhouse. I’m happy with that, especially considering this is a dream lifestyle for two people.
I pay for a luxury apartment in the center of town. We eat out for every meal. I hit the coffee shop seven days a week. We get massages, go to festivals, and celebrate life. Honestly, I go about things without a care in the world. I never think about money. That lack of concern is honestly priceless.
Looking forward, I expect elevated spending once more in November.
We’re gonna have a great time and eat some amazing food in Bangkok.
In addition, I plan to pick up a new pair of gym pants. My pants are done. I’ve had this pair of pants for more than a year now. I wear them six days per week and definitely get my money’s worth.
I also have to buy some new shoes. Both for exercise and for casual wear. The Nike shoes I bought a year ago have holes. And the leather wingtips that I wear every evening are in terrible condition.
Finally, my annual subscription to Traveling Mailbox comes due in November.
The good news is that the Rent & Utilities spending for November will be coming in light. That’s due to the fact that Chiang Mai is cooling down, requiring less usage of A/C.
I hope all of you had a great October 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.