I just broke a new record for my lowest monthly spending ever. This February, I spent less than $1,000.
$1,000. For the whole month. On everything. Now, February is a short month, so that helped.
But with inflation running rampant, it’s weird but also awesome to spend less than ever. Spending less money helps you achieve FIRE in two complementary ways. First, spending less means you free up more capital to invest.
Second, a lower spending level creates a lower threshold for achieving FIRE. You see how that works? You get to invest more… toward an easier target. It’s doubly powerful.
There are three highly effective strategies I’ve used and still use to get and keep my expenses very low.
Keep in mind, this article is coming at you from someone who went from below broke at age 27 to financially free at 33.
By the way, I explain exactly how I achieved financial freedom in just six years in my Early Retirement Blueprint. If you’re interested, you can download a free copy of my Early Retirement Blueprint here.
Today, I want to share with you three highly effective strategies to spend less, invest more, and achieve FIRE faster. Ready? Let’s dig in.
The first strategy is to track every single penny of income and expenses.
That’s right. Track every single penny that comes in and goes out.
I’ve been tracking every penny of my income and expenses for more than 10 years now. It’s been critical to my success. Setting out toward FIRE is like getting in your car and setting out toward a destination, right? But how can you possibly know how to get there or when you’ll get there if you don’t track speed or direction?
You can’t just wing it. And why would you want to?
You can’t get in your car and start driving in a random direction at a random speed. You need an exact destination, and you need to travel at a particular speed to get there at a particular time. FIRE works similarly. It involves math. The destination is the crossover point, or the point at which passive income crosses over expenses. And the crossover point can be reached at a particular time, based on the speed – or monthly amount – of your saving and investing.
Let’s say you spend $2,000/month. Well, then you need $2,000/month in passive income to cover that spending. And if you can build investments yielding, say, 4%, you’d be looking at an asset base of $600,000 to reach your crossover point and achieve FIRE. But you need the numbers to get the answers. You can’t pull these numbers out of thin air.
If you aren’t already tracking your exact expenses, be prepared for an uncomfortable surprise.
Every single person I’ve talked to over the years that didn’t track every penny in and out was shocked by how much they were spending when they did finally start to track everything. It’s easy to assume you’re spending X or Y dollars. But, you know, ignorance is bliss. And most people would rather just think everything is great than to confront an uncomfortable reality.
And the funny thing is, this is a phenomenon that applies only to expenses. If you go and ask someone how much money they make, they probably know that number down to the penny. But spending? Nope. Most people are truthfully unaware of this exact number.
This isn’t optional. You need to make this a mandatory part of your life… for the rest of your life.
It wasn’t until I started tracking every penny that I finally woke up. It was like the clouds disappeared and clarity finally entered my life. I felt like I had control over my destiny for the first time in my life. When I did start tracking, two things happened.
First, it gave me the exact numbers I was working with, which allowed me to draw up a schematic of my journey to FIRE so that I could reverse engineer my way there. I could see the destination. Second, the uncomfortable reality of spending more than I thought I was motivated me to get these expenses down, which accelerated the journey to FIRE. So the destination become something I could reach faster.
The great thing about living in 2022 is that there are so many easy ways to track your daily spending.
But there are countless apps that you can use.
And most of these can be set up in a way that basically automates the tracking so that electronic spending – like via a credit card – gets automatically logged and categorized.
Then you can just check in every few days to see where you’re at and make sure you’re staying at or under your monthly spending goal.
The second strategy is to focus on the “Big Three”.
The Big Three? I’m talking about housing, transportation, and food.
So why do I call these the Big Three? Well, that’s because these three categories are where most people spend most of their money. Sure, it sounds great to put up a tweet on Twitter about how you should cut down on the daily latte or whatever, but that’s like paying special attention to a paper cut when you’ve got a gaping wound bleeding you out.
Apply the 80/20 rule to your spending.
I’m referring to the Pareto principle, which states that for many outcomes, roughly 80% of consequences come from roughly 20% of causes. And so if you start tracking and categorizing your monthly expenses, you might see that you have 10 or 15 different expense categories. The mobile phone is a spending category. Your internet access is another. So on and so forth.
And when you look at all of your spending, housing, transportation, and food might only be 20% of the categories. But if you look at the numbers from a high level, you’ll probably notice that 80% of your spending comes from these three categories. And so you’ll want to focus 80% of your efforts on the 20% of your spending categories that likely account for 80% of your total monthly spend.
You need to be relentless with these three spending categories and hammer them down.
There’s an old saying about how to a hammer, everything looks like a nail. Well, this is the time when you want to be a hammer. And these three nails need to be smashed. But how do you go about doing that? If you want to achieve FIRE quickly, this is where you need to think about being extreme.
This is the point at which things become easy and difficult, simultaneously.
It’s easy for me to tell you how to get these expenses way down. But it’s difficult to actually implement extreme changes in your life. Talk is cheap, and actions speak louder than words. Our videos are all about actionable information, however.
So what are some extreme ways in which to get the Big Three way down?
Housing? I’m a big fan of renting cheap, small, and favorably-located apartments. It’s easier to right-size an apartment than a house. Also, houses tend to be built in far-off places that require cars. This brings me to my second point, which is on transportation. If possible, live a car-free life. Walk. Bike. Use an e-scooter. Whatever. Just not a car. As someone who worked in the auto industry before retiring early, let me tell you from firsthand experience that cars are huge burdens and expenses.
Food? Easy. If you’re in the USA, limit or totally avoid restaurant visits. Make your own sandwiches, pasta, or whatever else you eat. Paying someone else to make your food, serve you, and wash your dishes is an expensive luxury. If you can afford to regularly do that post-FIRE, great. But this is something you’ve gotta eliminate on your way to FIRE.
The third strategy is to execute geographic arbitrage.
Geographic arbitrage has totally changed my life.
What’s this concept all about? Well, geographic arbitrage is usually thought of as earning in a strong currency and spending in a weaker currency. And so you do this by setting up passive income, business income, and/or remote income in a developed country like the US or Australia or the UK and then move to a cheaper, developing country like Mexico, Thailand, or the Philippines. You geographically untether the income, which geographically untethers you. After all, one of the best things about being financially independent is being geographically independent.
I executed geographic arbitrage by moving from the US to Thailand in 2017.
And I take advantage of the fact that a dollar goes a long, long, long way in Thailand after converting to baht.
I’ll give you an example.
I rent a luxury, fully-furnished apartment in Thailand that’s located in a great, walkable location in my city.
What do I pay?
13,000 baht. That’s less than $400/month! We actually shot a video not long ago where I showed you what this apartment looks like.
I easily live without a car, knocking my transportation spending down to nearly $0. Since I can get a good meal here for about $2, my food spending is at rock-bottom levels. That is the power of geographic arbitrage. Now, this is geographic arbitrage in the international sense, which I think is the more common way to think about it and execute it.
But you can commit geographic arbitrage domestically, too.
Geographic arbitrage is basically taking advantage of the lower cost of living in one physical location relative to another physical location once you’ve set up your income in a way that’s geographically untethered. This can easily be done in the US. The US is a massive country. Some places in the US are expensive, and some places are cheap. Some places have lots of opportunity, whereas some don’t.
I actually moved from Michigan to Florida way back in 2009 after being let go from my car dealership day job in the Metro Detroit area during the depths of the Great Recession.
I moved to Florida in order to take advantage of a more diversified economy with more job opportunities, no state income tax, a lower cost of living (at that time), and a better climate for living without a car.
So I did commit domestic geo arb first, before upping the ante and going international later. And it was moving to Florida that allowed me to build the foundation for my journey to FIRE and actually achieve FIRE.
Admittedly, Florida’s gotten a little expensive in recent years. It seems that I was ahead of the curve, but now people everywhere are seeking the same things I moved there for in 2009. So I’d probably be looking at a different state in the US in 2022. But the US is massive. Plenty of places to consider.
There are cheap areas to live all over the US. But you might have to move.
Maybe it means moving states. Maybe you simply move to a cheaper city across your state. I’ve met plenty of American expats over here in Thailand. And I’ve heard a lot of complaints about how expensive the US is. However, they come from expensive places like San Francisco or Boston or Miami. They almost never come from places like Omaha, Tulsa, or El Paso.
There are trade-offs to everything in life. You need to figure out which benefits are worth the drawbacks. If you want to achieve FIRE ASAP, you need to make tough choices and accept certain drawbacks.
For me, there was no greater benefit in life than FIRE, and I saw no bigger drawback than spending most of my waking hours at a job I didn’t like.
A lot of people seek out luxuries like a nice car, a boat, a big house, or fancy clothes. But I couldn’t imagine a fancier luxury than financial freedom. I mean, what would you rather own than your time? If attaining the greatest luxury in life meant moving away from the place where I grew up, so be it.
Every place is just a rock on the ocean. Each one has pros and cons, but it’s us humans that give meaning to these places. So seriously consider executing geographic arbitrage by taking your untethered income and spending it in a cheaper place where your dollar goes much further.
— Jason Fieber
P.S. If you’d like access to my entire six-figure dividend growth stock portfolio, as well as stock trades I make with my own money, I’ve made all of that available exclusively through Patreon.
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