I was talking to my younger brother, Chris, recently and he told me his cost of living is only about $1,250 per month. That’s extremely low considering he lives in Silicon Valley, one of the more expensive areas in the USA. How does he do this? I hope he isn’t eating ramen noodles every night. That’s not healthy at all. $1,250 per month sounds like a very Spartan existence for that area of the country. We live modestly and our monthly expense is around $4,000 per month. Portland is quite a bit less expensive than Silicon Valley as well. How does he do this? Let’s see if he can answer some questions for us.
Can you break down your monthly cost of living?
- Housing and Utilities: $550. I rent a room from a friend who owns a home in an older, but safe neighborhood in the East Bay. Everything is close by and accessible within a half hour drive w/o traffic.
- Food: $250. I go out to eat with friends once or twice a week. The rest of the time I cook at home. Cooking at home is cheaper, healthier and just as tasty when you know how to cook.
- Transportation: $75 for gas. $75 for auto insurance. I have a short half hour commute to work and I also have the flexibility to work from home part time so I don’t spend much time on the road. A safe driving record coupled with an economy car keeps my insurance cost low.
- Phone: $50 for phone. I have a grandfathered plan with Sprint that includes unlimited data, unlimited text and more minutes than I have use for.
- Misc: $250. This is the discretionary fund for miscellaneous expenses I have every month. It includes everything from entertainment (clothes, gadgets, etc…) to routine oil changes that come along every few months.
You make a decent income as a techie in Silicon Valley, so how come you don’t live it up a bit? Can you give us a little background on why you are so frugal?
There are two main reasons. First, I don’t believe spending more money and “living it up” would make me any happier in the long run. I’m perfectly happy living a modest and comfortable life style. Example, I could afford to buy a new luxury car but my current Mazda hatchback can accomplish everything I need. No, my car doesn’t have a neat dashboard rear view mirror display, but who really needs that stuff anyways.
Second, I spent way too much time in school pursuing an advanced degree and started working later than I would have liked. Yes, I have a couple of nice calligraphies papers in a drawer, but not much to show for it in my bank account for those years. While I didn’t incur any debt because I worked and had scholarships and assistantships, I wasn’t able to put much money away, either. I feel like I need to make up for that lost saving time now. I’m still single so I can live the way I do now but I know that eventually when I have do have a family, my expenses will rise considerably.
What do you do for entertainment? Do you go to concerts or movies? Going out on a date can cost a lot of money, too. $250 doesn’t sound like much for a single guy.
Like any other large city, the San Francisco bay area offer more venues for entertainment than I can count. I just stick to ones in my price range. If I skip the court side seats, I can still afford to go to a Warrior’s game at Oracle Arena or a Giants game at AT&T park.
As for dating, I admit it. I’m a cheap date. Pinkberry frozen yogurt and a walk around Mission Peak, coffee and a movie or maybe a picnic at Crissy Field looking out at the Golden Gate Bridge. If I get a good vibe, I’ll make fancier plans. I’m not going to get along with someone that demands I take her out to a $200 dinner every time we got out.
Can you share some of your long term goals? Are you trying to hit a certain amount of net worth?
It’s hard to predict how much money I’ll need in the future, you don’t know what will happen, but I share my brother’s aspiration for financial independence. I want to save enough money so I can make any decisions without worrying about whether I will have enough money to pay the bills. My main goal right now is to save and invest soundly so I can be semi-retired and have financially freedom by the time I’m 50.
Thank you Chris for sharing your frugal lifestyle with us. I think it’s great that he is working on financial independence. He is in software engineering and that’s not a lovable field. You never know when you’re going to get laid off. It’s best to save as much as you can while you’re making good money. I think he should splurge a bit when he goes out on dates, though. Pinkberry isn’t going impress anyone. 🙂
For 2018, Joe plans to diversify his passive income by investing in US heartland real estate through RealtyShares. He has 3 rental units in Portland and he believes the local market is getting overpriced.
Joe highly recommends Personal Capital for DIY investors. He logs on to Personal Capital almost daily to check his cash flow and net worth. They have many useful tools that will help every investor analyze their portfolio and plan for retirement.
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