How we can afford to travel is a question that comes up often for us. I will show you exactly how we afford it by showing you our budget.
The budget is not just for controlling spending, but also to make sure you know how much you are spending. In the case of traveling, it will explain if you can afford it and how long you can afford to keep going.
Wendy and I first got serious about our budget right after we got married. It was around this time that we decided we wanted to take control our lives, travel, and live with less stress. We knew we had to get our finances in order to do this.
The first time we took a deep look we were shocked to find that we were averaging over $1000/month on restaurants. We had one month that was $1500. Ouch! If you aren’t organized and paying attention to your money its easy to let that happen.
Now that we’ve been doing it for a while, we can estimate within a few hundred bucks how much we are going to spend in any particular month.
Take a look at Our Budget. This is the actual budget we are using. I’ve listed both our home and travel budget so you can see them side by side.
There are a couple things to take note of.
- We have 3 rental properties, which explains all the mortgages, credit lines, and tax payments.
- We only put certain expenses on the American Express card so we know how much should go on it.
- We saved enough to make all the irregular payments while we are traveling.
You can see that it is about $600 less per month while we are traveling. If you put the irregular bills back into the mix, it is about $100 less. In general, its about the same traveling as it is at home.
We bring in about $2700/month (depending on maintenance costs) in revenue from the rental properties. So, that leaves us at about $1400/month in the negative. With that knowledge we can estimate how much we need to earn while away or how long we can use our savings until its gone.
If you would like a more comprehensive set of instruction, then I highly recommend this book: I Will Teach You To Be Rich. The title is a little outrageous, but the book is packed with great ideas on how to take control of you finances.
If you would rather have the condensed version, then here is a step by step guide for creating a budget.
- Identify your fixed costs
- Identify your variable costs and turn them into fixed costs
- Identify your irregular costs and turn them into fixed monthly costs
- Write it all down
- Review and trim it down
These are easy, these are the monthly bills that don’t change.
|Cable||100||Do I really need this?|
|Cell Phone||100||Can I switch to pre-paid|
These are a little more difficult because they change. Just go back a few months, come up with a monthly average, and write it down. In the case of gas/electric you may want to sign up for budget billing or do it yourself by going back a whole year to account for season changes.
|Gas||150||Ave $150 month|
|Groceries||$250||Ave about $60/week|
|Restaurants||$1000||We need to fix this problem|
These are the ones that don’t come every month. If they are variable as well, then convert them into fixed costs like you did above. Then turn them into monthly. Don’t forget about these, they are important because you don’t want any surprises.
|Water||$30||About $90 every 3 months|
|Property Taxes||$75||$450 every 6 months|
|Estimated City Taxes||$100||$400 3 quarters|
Now Put it all Together
Don’t forget things like Savings, Gifts (weddings, christmas, etc..), and a Buffer for those things that you just can’t seem to figure out. Sign up for Google Docs or open your favorite spreadsheet program and get started!
Once you have it all written down you have a budget based on your current expenses. This is the easy part because it just represents what you are already doing, but its the first step. After that, you can go back through and start to trim the fat.
We use a lot of other tricks to manage our money such as the Allowance, the Envelope System, an Emergency Account, and a One-month Buffer. I will follow up in another post to explain what those mean and how to use them. In addition, we will keep you updated every month on how well we are sticking to our budget.
Hope you enjoyed the post and that you start saving some money so you can come join us on the trip!!!