Three weeks ago I added cash numbers to my weekly review. What I'd make actively, passively, spend. Two weeks ago the line on my review read:
What'd I spend this week? Not sure. Figure out expenses next week
This week it looks like this*:
What'd I spend this week?
July 18: room $32, food $12, coffee $4
July 19: room $15, food $10, coffee $4, transit $2 [groceries $18, vitamins $66]
July 20: room $15, food $0, no other expenses
July 21: room $15, food $12 coffee $4 [groceries $3]
July 22: room $15, food $0, no other expenses
July 23: room $15, food $0, no other expenses
July 24: room $15, food $0, no other expenses
July 25: room $22, food $12, coffee $7 [groceries $13 - but bought at convenience store, and had to throw away two things I bought because pork was in it]
26 room $15, food $0
Total: room $144 ($18/day), food $46, coffee $19, groceries $31, transit $2
-> I also bought vitamins for $66, but that's a long term expense over the next two months, not an expense for just this week.
Total spent: $223 for this week specifically, $27 per day. Buying food out in the world costs about $12/day. Groceries cost less than $7.75 per day, so that's much cheaper. Also, coffee is a bit of a killer if I'm getting my stuff done outside of the coffee place. Next week, less coffee out in the world, lower room expenses (would it make sense to move somewhere where the room is lower than $15/night?). Turn eating out into groceries, be smarter about groceries so they're not bought at the convenience store and don't need to be thrown away. I didn't get a massage this week, which I should keep doing for my health, which will also increase expenses.
*My spending is in Hong Kong dollars, but I convert it to USD while filling out my weekly review. I added dollar signs, punctuation, and the word "July" to make it readable for this blog post - my notes are typed in more shorthand.
I'm cutting my expenses to bare bones right now until my next business ramps up. Even then, I've got pretty aggressive goals for rebuilding my savings after a couple years of not working while I was learning and training.
Two thoughts -
Luxury doesn't suit me personally, but having the trappings of prestige and luxury around you do very much help you get business and other things done in certain situations. I'm well aware of that, and I scale up my spending when it helps me reach my goals. It doesn't make sense to be penny wise and pound foolish.
Second, I've had people ask how it's possible to make $4,000/$6,000/$8,000 per month and keep living on rice and living really cheaply. They ask, why do that? Why not get a nicer place to live, eat nicer food, get a nice car, etc, etc? And the answer is - because I can do better things with the money.
July 16th-18th I spent the night in a slightly nicer place that cost $32 per night. Now I'm in a place that's $15/night. The $32 place is nicer, yes. It might even be twice as nice, maybe. But it costs $17 more per night. That's $6205/year. With my skills and ability to deploy resources, I could turn that into $10,000 over the next two years, $20,000 over the few years after that, and so on. Having money along with my labor, work ethic, and willingness to learn means I'm going to have opportunities to double, triple, and quadruple the resources I have at certain times
Spending $6205 this year for a slightly nicer room each might mean I have $500,000 less in 20 years. Half a million? Really? Yes, really. If I have a cashflow issues in a business I build or I miss an opportunity to invest... let's say in 10 years I'm a little bit short of having $100,000 free to make an investment that looks like a good bet to produce some large returns. Well, that's that $6205 coming back to bite me.
But don't think I'm suffering or being foolhardy! Oh, no - I just think my life through in long blocks of time.
In my mind, I can already imagine my daughter playing violin or piano, and my son playing tennis or fencing. I can already see the organizations I'm going to build. I see the opportunities to fund science and help people and do amazing things. I can already see the day when I get to design all my own clothing that express my individuality and puts a sense of art and aesthetics into the world. I can already see households with happy children. I can already see my grand-kids. I get to experience all my memories three times - while I'm having them, while I'm remember them, and while I'm working towards them.
I do know about prestige, though, and visages of power and success and things like that. Personally, that doesn't really do it for me on a personal level, but I live in reality, so I'll use all the tools available to me. So I'll put down money to make money and reach my goals and objectives.
Eventually it'll be trivial to upgrade to the best of stuff available and I might do it at that point. If you invest 90% of what you earn and live on 10%, how long until your 10% is higher than everyone else's 90%? Not too long, I think. It's Yoshinoya and cheap rooms and groceries and instant coffee until then. My future children will start their training in musical instruments, a third language besides the two we speak in the home, and a sport at age 3. I don't miss the nicer room. The $6205 buys a lot of piano lessons, tennis lessons. It builds a lot of organizations that do a lot of good. It helps me reach the objectives that really matter to me faster. My bed is hard? So be it. I don't like sleeping anyways.
I've read several of your posts, and this one is one of the most inspiring ones! I really respect you - not just because of what you do or your lifestyle, but because of the ideologies and virtues that motivate you to do them. Keep em coming! You're helping people to make the world (and their lives) a better place.
Fuckin' hell. I stumbled across your blog through Tynan's, and after reading a few posts, I'm just stunned. Definitely my favourite blog now. The most useful one too. I'm going to read all of this, learn from all of this, and take what you've written and use it in making my goals a reality. Cheers, man. Keep writing.
--A Twenty Something Guy Who's Just Starting Out
" I get to experience all my memories three times – while I’m having them, while I’m remember them, and while I’m working towards them."
Another great one Sebastian, keep it up.
It's tricky, because on the one hand, there is all the magic of compound interest you refer to, and OTOH, if you love working and will be making good money the rest of your life, then you have ample opportunity to make it later. For people who want to retire as early as possible, working hard for max savings makes sense. The difference between saving HARD (and researching a minimal cost retirement in another country) vs. saving just 10% a year can easily mean retiring at 35 vs. 60.
Bur for those with valuable skills who like to exercise them (which it seems like is the case for you), who like to always have a hand in the game, the value of saving is less.
One unfortunate thing is that when you are young, you tend to have both rapidly growing savings and career, it is the time when investing in savings yields the most l ong-term returns...and so does investing in yourself. Both of them compound.
Personally, my net worth has gyrated insanely over my adult life, so making good spending decisions has always been hard!