Your plan to quit the office and travel the world might be music to your ears, but it’s sure to remain a fond dream without the one resource that keeps all of us cube grinding: money. The mother of a million sighs; the killer of a million dreams. One of my first posts on this blog questioned what are you saving your money for? At the time, Sarah and I didn’t have an answer. Now we do, and since I decided to make the leap from working someone else’s dream to working my own, money’s been on my mind a lot. Too much in fact – I agonize over even the smallest purchases, but it’s all in the name of living the dream. While we aren’t through the woods yet, I thought I’d share how we’ve been saving over the last six months. Hopefully you’ll find this useful when you start saving for extended travel or any other long-term savings goal.
Define the Scope
Be specific about the scope of your goal. Will your trip last a month? A year? Two years? What part of the world will you be visiting? Try not to let money dictate these parameters (there’s plenty of time for that later). Instead, focus on what you want to do.
I knew I wanted to give myself two years to see where Traveling Savage could go. I’m married and I don’t want to be away from Sarah for painfully long stretches, so the idea of doing one-month stints in places around the world quickly came into favor. I decided on eight one-month deployments over the span of two years. In other words, every quarter I’ll be gone for a month. This should give me enough time to travel slowly and deeply.
Set Saving Goals
Travel is an area where’s it tough to pin down exact figures, so when it comes to setting saving goals it’s all about estimation. Think about where you’re planning to visit. Does it require British Pounds or Euro currency? What’s the currency exchange rate? For example, the US Dollar exchanges favorably in Southeast Asia and poorly in the United Kingdom. Use the converted currency of your destination(s) and remember the flights. Please do not forget this: in some places the USD appears to exchange favorably in the local currency. However, the prices of goods and services are sometimes elevated to the equivalent cost back home. A hypothetical example: say one USD is worth four Argentine Pesos (ARS) and a beer back home costs $5. You might be shocked to find the beer in Argentina costs 20ARS instead of 1.25ARS. Ultimately, this means it’s not any cheaper despite the favorable exchange rate.
Our savings goals split into four accounts: one for Traveling Savage, one for Sarah’s venture (unrelated), one for emergency expenditures related to our house and vehicles, and one to cushion us in the year following my two years on the road. Luckily, we’d already been saving for years for god knows what, though not as aggressively as we could have been. We allocated our existing savings among the four accounts and reached our goals in two of them. Off the bat our savings went to Traveling Savage and I’m happy to say we hit our goal there this month. Now, we’re redirecting our savings to other account.
Build a Budget
This one’s a bitch, especially if you’re anything like Sarah and me (i.e., people who’ve never lived on a budget). Bust out the spreadsheet and divide the money into four areas:
- Regular expenses are expenses that occur monthly and are easy to predict, such as mortgage/rent, electric, gas, cable, wireless phones, etc.
- Irregular expenses are expenses that occur once or twice a year or are hard to predict, such as water bills, insurance, gifts, etc.
- Discretionary spending includes necessities like groceries, gas, and household goods and entertainment (i.e., the things that keep you enjoying life).
- Savings is the money used to make your goals a reality.
Calculate the monthly expenses and determine how you want to split discretionary spending and savings. Everyone’s different here. It all depends on how aggressive you want to be. With savings goals and a budget in hand, you should be able to identify the date when you’ll reach those goals.
Once I decided to pursue Traveling Savage full time, we tracked forward into the calendar and came up with the desired exit date from my current position. We decided right away that we needed to save aggressively, which meant identifying the bare minimum we could live on each month. One lesson learned is that you should build in a small cushion in your budget. This money shouldn’t be allocated anywhere and is there to absorb fluctuations in your monthly expenses. Breathing room – not exactitude – is needed. Part of our goal was to be able to maintain our lifestyle on Sarah’s salary alone and we’re close to making this work. This leads me to my last point.
Revisit, Reassess, Refine
Your first stab at building a budget probably won’t work. Maybe your second attempt will fail, too. Inevitably, there will be fights. We’ve had more than a couple tiffs on account of $100 Wild Birds Unlimited and Target bills (seriously, more candles?). We went into the red in each of the first five months on our budget and we’re now on version 3.0. The key to finding a workable budget has been meticulously tracking our expenses. It’s amazing (and scary) what you find. We started retaining every receipt and entering them into a spreadsheet. More recently, we starting using our online banking web site to track our budget. The site automatically categorizes expenses and allows you to enter notes on each line item – very handy.
Every three months we’ve been looking at our budget and adjusting the numbers to ensure our financial health once I take the leap. For the first time in our relationship, we’re having to say no to events and outings because we simply can’t afford it. We’re still getting used to this, but the real impact on our lifestyle has been pretty minor. The upside is the beauty of those completed goals, the feeling of satisfaction at bringing a dream into the flesh.
What saving tips do you have? How did you save for your travels?