One of the major reasons I’m a dividend growth investor (or even an investor at all, really) is so that I can grow my wealth and investment income, preferably at a rate that exceeds inflation.
This is especially a concern in the United States, as you have low-single-digit inflation that’s coming on top of an already large base.
Indeed, it’s not just inflation (a rate of change) that you have to be concerned about; it’s also the base upon which that rate of change is occurring that should be strongly considered.
Indeed, the latter may end up affecting aggregate costs (which is ultimately what really matters) more over the long run. Depends on the numbers.
I broke this down in my piece explaining why I no longer worry about inflation now that I’ve indefinitely relocated abroad to live out my early retirement dreams in Thailand.
But seeing as how I’ve been living here in Chiang Mai, Thailand for a year, I thought it’d be interesting to quicky revisit that piece and look at the real-life numbers to see if anything behind my thesis is amiss.
What I want to do is go through some of my major expenses and compare what they’re costing now to what they were costing me a year ago.
Before we dig in, I’m basically going to concentrate on what I’ve always called the “big three”: housing, food, and transportation.
I’ll talk about some ancillary budgetary concerns, but the bulk of one’s spending will almost always be allocated toward those three budget lines.
Let’s dig in…
This one’s easy.
Nothing has changed here.
I was paying 14,000 baht per month for my luxury, furnished, one-bedroom apartment in October 2017.
I’m still paying 14,000 baht per month (~$426/month based on the current exchange rate, which is right about the same in dollar terms as it was this time last year) in October 2018.
Since overall inflation as it’s seen at the personal level will likely be disproportionately impacted by any rises in housing costs (due to housing usually being one’s largest single expense per month), it’s already pretty much a huge win here. I can tell that right off the bat. The thesis is more or less intact.
Keep in mind, too, that my 14,000 baht includes the luxury apartment, furnishings, water, satellite TV, Wi-Fi, 24/7 gated security, fingerprint access, a pool, a gym, a sauna, and a perfect location in the city.
Since rent includes most utilities, that keeps inflation in those categories in check, too. No worries about, say, rising costs to access the Internet.
Next to housing, most people spend most of their money on food.
Now, I’m not in any way trying to live cheaply when it comes to food, nor am I attempting to live cheaply in any other way across the board.
I’m living the lifestyle I’d like to live, regardless of money. It’s just that a value-conscious person living in one of the best-value cities in the world ends up spending relatively little money. That’s a natural byproduct of setting one’s life up correctly from a structural, holistic viewpoint.
In regard to food, I’m eating out for every single meal (which is twice per day, as I intermittently fast and eat only lunch and dinner). And I’m usually paying for two people: I voluntarily accommodate my significant other due to the large gap in our personal economies.
We tend to eat at a rotating stable of local markets and restaurants. While I’m not living cheaply, I do pay attention to price (in relation to value). So I’m very aware of what things actually cost.
Almost every single place we eat at is posting the same prices they were in October 2017. This practically hasn’t changed at all, as far as I’ve noticed.
There are two exceptions, though.
Two local Thai markets that we sometimes eat at have increased their prices. One just did so very recently. One did so at the start of 2018.
One increased prices from 35 baht per dish to 40 baht per dish. The other increased prices from 40 baht to 45 baht for a bowl of Khao Soi. Locals told me this was the first price increase in a long time for the latter place. So that’s something to keep in mind.
In dollar terms, in the case of the former, that’s going from $1.07 to $1.22 for a meal.
So that’s a 14% YOY increase, which is actually substantial in percentage terms. But in absolute terms, which is what matters more, it’s negligible because it’s coming off of such a low base. We’re talking pennies. And so my food budget hasn’t really been impacted all that much. Besides, we don’t eat at these two markets every day, for every meal.
The restaurants we frequent, which have higher prices (and thus would affect me more from the standpoint of inflation), are showing the same prices they were this time last year. Now, these are restaurants that we frequent. I can’t speak for every restaurant in the entire city.
Overall, we’re talking two places out of probably 50 or so we regularly patronize. So when you average it out like that (especially after accounting for unchanged numbers on the higher prices), the annual inflation here on food is probably less than 0.1%. And that’s on a very small base.
Meanwhile, the coffee shop I go to every day is posting up the same prices for the large iced caramel macchiato I drink every day: 70 baht (or about $2.13). So that’s awesome.
In fact, the coffee shop recently started up a sweet loyalty program. Buy 10 coffees, get one free. So the cost of coffee has actually gone down for me YOY on a per-serving basis.
I can’t share much on groceries because I basically don’t buy any. I only stock the apartment with water, the occasional snack, and a few cans of Coca-Cola. All of that is unchanged in price terms over the last year.
This one’s a bit tougher to nail down because there are many ways to transport oneself around. If you own transportation (like a car or a motorbike), then you’re obviously exposed to all kinds of volatile input (repairs, the cost of gas, etc.).
Since I naturally prefer to walk as much as possible, my transportation costs are obviously very limited. Moreover, there’s very little variance because there’s almost no input.
That all said, I can say that there have been some changing market dynamics over here in Chiang Mai that have caused rising costs for me on my transportation.
Specifically, Uber exited all of Southeast Asia. That left the local competitor here, Grab, to grab (see what I did there?) that remaining market share and raise prices as a monopoly.
Whereas I was actually sometimes getting around town for free with Uber (after using generous promo codes), that’s a neat trick I haven’t been able to repeat with Grab (due to less generous promo codes).
However, it’s still very, very cheap to take a Grab car to a destination. For perspective on this, I just recently took a 6.5-kilometer trip with a Grab car. It ran me 59 baht (or $1.80). That’s less than the cost to use the bus in a lot of places in the US.
It’s difficult for me to nail this down enough to quantify it – I simply haven’t had any kind of regular or reliable transportation schedule to go back and compare notes on, nor did I ever pay much attention to the rates or anything between both platforms – but I would suspect that my transportation costs on an apples-to-apples basis have surely risen by at least 10% (with the change in promo codes driving much of this approximation). This isn’t inflation in the traditional sense; it’s rather a unique change in the local market, so it’s hard to classify this.
However, spending on transportation still comes down to lifestyle more than anything.
For reference, I spent just over $50 on transportation during my first month of living in Chiang Mai (because I was using cars more while familiarizing myself with my surroundings). But I spent $37 on transportation just last month since I’m more familiar with the city and now walk more. I suppose I’d have spent maybe $33 or something if Uber were still here.
Since this is the one budget category (of these three being discussed) that I spend the least on, its impact is pretty negligible on the overall inflation I experience at the personal level.
Furthermore, the longstanding local “public transportation system” that’s prevalent – red cars, or songthaews – still charges the same 30 baht per trip that they did last year. We take the songthaews when it makes sense.
Lastly, there’s actually been a development that potentially somewhat offsets the disadvantageous exit of a competitor in the ride-sharing space. That’s the recent introduction of a bus system in Chiang Mai. It costs 20 baht per person for the whole route. The bus system is the first leg of a more complex public transportation system that’s being scaled in CM, to be later supported by an already-approved light rail system.
Overall, I’m hesitant to say outright that transportation here across the board is more expensive on a YOY basis. It really depends on how you’re getting around. The building out of a more traditional public transportation network will make getting around Chiang Mai easier, faster, and cheaper than otherwise.
Other costs are pretty much the same as they were when I first got here.
I currently spend 2,700 baht (or ~$82) for a three-month membership to my local gym. That’s the same as it was this time last year.
I currently spend 500 baht (or ~$15) on my mobile phone plan, which includes unlimited mobile access to the Internet (and even unlimited hotspot usage). That’s also the same as it was this time last year.
I also shave quite a bit, requiring the regular purchasing of razor blades and shaving supplies. The price of all of this remains unchanged YOY.
So my thesis is still pretty much intact here. I haven’t experienced much inflation at all after one year in Chiang Mai, especially in the categories that count the most (like housing).
Overall YOY inflation across my entire budget is well under 1%. It’s actually closer to 0% than anything else.
In my view, the big variable is really the lifestyle.
Lifestyle inflation is surely more of a danger for an expat than inflation at the economic, country-wide level (which is also mostly true for a non-expat living in their home country).
While my apartment costs the same as it did last year, it would be easy for me to move into a bigger, more expensive apartment and thus spend more on housing. Inflation might be at zero on an apples-to-apples basis, but my lifestyle would be causing a higher degree of spending. Fortunately, I’m very happy with where I live.
And while the currency exchange rate might seem to be an issue in the immediate sense (i.e., you might spend more or less USD for your baht in any given ATM withdrawal), this smooths out over the long run. Indeed, the exchange rate today looks pretty much the same as it did this time last year, even though it’s been slightly bumpy along the way. I don’t really concern myself with these daily/monthly gyrations much in the same way that I don’t concern myself with daily/monthly gyrations in the stock market.
It’ll be interesting to take another look at this in one more year to see if there are any changes, but I suspect it’ll once more come down to lifestyle (rather than an issue with broader economic inflation in Thailand or Chiang Mai).
What do you think? Was this interesting? What does inflation look like where you’re at?
Thanks for reading.
Image courtesy of: Sira Anamwong at FreeDigitalPhotos.net.
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