I Completed My Personal Spending Challenge For December 2016

I am impressed, didn’t think I could pull it off, I ended December with spending less than $1,500 which was well below my goal of spending less than $2,000. This is the least amount of money I have spent since college, which I graduated in 2001. My lean December challenge 2016 was a success.

This post will be an overview of my expenses, my financial goals and looking at income/spending form a wider perspective. I don’t want to make it just about the money – that’s not at all what this challenge was about.

My Spending For December 2016

The reason I set this challenge for myself was because the majority of my spending is driven by emotional factors.
I spend when I’m anxious.
When I feel that tinge of emptiness.
When I want to create a little excitement.
When I feel lonely.
When I’m stressed.

It’s not about the exact dollar figures, it’s about creating a system that’s sustainable. If I had an entrepreneurial mind and could generate millions of income every year then I could probably spent around $300k a year and still be financially independent and feel free.

By getting my spending down from my monthly average of $3,370 (see below) down to $1,500, I am able to buy more time. Why? Because time=money. In order to generate the extra $1,800 a month, I would have to work more. I choose free time over work.

My December Spending Breakdown

I have 10 categories listed above, those are the ones I use in my YNAB budgeting software. I used to have a lot more categories, which was helpful because I needed to know exactly where my money was going. I have since dwindled it down to these 10.

But looking at it closely, I am really spending on 4 main categories:

• Housing (HOA, tax, insurance, maintenance)
• Food (groceries, dining out)
• Entertainment (sports, liquor, socializing, tech, clothes)
• Health (dental, medical, exercise)

I spend very reasonably when it comes to housing. My grocery expenses are fairly low with slight room for improvement. I am fortunate that I’m healthy so I don’t have a whole of expenses in the health department. It’s really the entertainment category where I can create the most amount of wiggle-room.

SIMPLIFYING The Budget Even More

What I learned from this month of lean spending is that I can lower my expenses quite a bit, by over a half, without affecting my quality of life. Yes, I have to be more cognizant of my spending, but I don’t have to trade my quality of life in order to do so.

To make budgeting easier I could dwindle down my spending categories to just 2, elective and necessary.

Necessary would be housing, food and health.
Elective would be entertainment.

If I focus my goals on generating assets that will make enough income to cover my necessary expenses then everything else is easy. I simply work enough to create income for my entertainment.

The Mindset Of Earning To Have Fun

That’s what it is, right? Imagine you go to work, you have a 10-hour shift. Your colleague bitches and says “Damn it, I gotta work this shift, it sucks, I’d rather be at home relaxing, but I need it to pay for the house, student loans and car!”

You on the other hand are working that shift because you want to pay for a new hot-tub, a vacation later in the year and some spending money to go skiing. You might even pick up some extra shifts so that you and your partner can dine out more the next few months.

I worked 114 hours at my Kaiser Permanente job this month. It’s a lot, not necessary for someone who is financially independent. I also worked about 20 hours with Remedy and 15 for JustAnswer. In total I had a take-home income of a little over $10k.

This income is going straight to my entertainment category. Not because I am going to go buy a $5k watch, a $2k bicycle, a $1k pair of shoes or spend $4k on a vacation overseas. Instead, it’s money that’s going to my entertainment fund for the entire year of 2017.

Furthermore, as a former workaholic, I’m slowly transitioning off of work instead of cutting the cord completely – which I tried, and failed.

My Spending For All Of 2016

As my own CEO and CFO, I ran the numbers for Dr. Mo’s lifestyle for all of 2016. It looks like I came in a smidgen above $40k. I encourage everyone to be their own financial adviser, their own tax attorney, their own CPA and most definitely for everyone to be the CEO of their life.

I spent a good deal on nice, new furniture. I simply didn’t have the creativity to acquire used ones. I spent $6k on entertainment. I live in an age when entertainment is given away for free just so that companies can advertise to us, yet I wasn’t able to capitalize on that.

I spent a lot on eating out and socializing with friends and I spent nearly $3k on traveling and taking vacations.

Finally, I had around $6,500 of work expenses. Money which I spent prepping for work or maintaining license, getting CME’s etc. At 16% of my overall budget, I am certainly not going to miss working full-time.

To put it into perspective, my mom spent about $12,000 in that same 12-month period. No, she isn’t bedbound or living out of the back of her van. She pays rent, buys groceries, owns a car, buys things for her 2 grandchildren and even had some sizeable dental expenses for 2016.

People Live On Far Less

My friend V. spent perhaps $18k in the same period of time. She is a lawyer, has a dog, a cell phone bill, owns a car, pays rent and flies out a few times a year to see her family.

Another buddy, M., is married, lives in Cali, owns 3 properties, a nice luxury car, works full-time as a doctor and spends less than $30k together with his wife.

Then there are those who are “poor”. They take home around $25k a year without any student loan debt, but have decided to carry a credit card balance, take regular trips to various destinations, have car payments and buy nice clothes.

This latter group is spending very little but they feel that life is unfair. They are poor, they can’t get ahead, they don’t see a reason to save because “what’s the point?”.

Creating $1,500 Of Monthly Income

This month I realized that I can live one of the most lavish lifestyles on less than $1,500. I honestly didn’t think it’s possible. I had to get creative, I had to adjust my thinking but in the end I look back and recall the good things such as going to the gym, socializing with friends, going for walks, writing at cafe’s, biking across a bridge, baking bread at home, making my own deodorant and lotion and buying books at the bookstore on how to make wine.

What is $1,500 a month?
It’s $18k for the year.
It’s $50 a day.
It’s 3% of $600,000.
It’s the net income of a $2k/month rental unit.
It’s selling $3k worth of goods at a 50% markup.
It’s working 15 hours as a doctor.
It’s renting your spare bedroom out at $100/night for 15 nights.
It’s working 45 hours a week at minimum wage.
It’s lending out $300k on a P2P lending site.
It’s seeing 2 patients a day in your own medical practice.
It’s writing 50 posts for medical websites.
It’s reviewing 10 medical cases for a firm.
It’s selling 100 books at $15 each.

Why I Value My Time So Much

The majority of my friends and colleagues say that if they didn’t have jobs they would be bored. Their work gives them meaning, passes the time and keeps them busy. Quite a few have said “I would go crazy if I didn’t have a job.”

Given this local statistic, I find myself quite outside of the norm. I don’t have any kids to escape from. I don’t get a sense of accomplishment by working for another person to make their business profitable. I am not trying to run away from my life or problems.

I value my time because the things that bring me joy are all non-work related. I like exercising, cooking, baking, riding my bike, building things, reading, writing and having conversations over coffee or beer.

I don’t have anything on my bucket list. Strangely, I’ve been asked this now multiple times by different people. I’m 38 and I have exhausted my bucket list. I’ve traveled everywhere I’ve wanted to go. I’ve owned the car of my dreams. I’ve tried every sport I’ve ever dreamed of. I have had the most prestigious career. I’ve had the wildest nights. I’ve built incredible things with my hands. I’ve listened to some of the best music I can fathom.

I derive such indescribable joy from the simplest things that I’m anaphylactic to anything that disturbs my peace. I can always build a new career, I can always work more and I can always make more money – it’s time that I don’t have as much control over.