As mentioned before and just common knowledge: traveling can be very expensive. Even when it is on the cheaper side, like staying with friends or family or going on a cruise, there are extra costs that are not part of your normal living expenses. For this reason, I want to share with you how we budget our life so we can make travel a part of it. Hope it helps you with some new ideas!
My hubby and I are blessed to have well-paying jobs for our geographical areas, but we also have side hustles on the side, primarily with selling on eBay and having a camper rental on AirBnB. All of this is helpful, but even when we did not have the jobs or pay that we do now, we still were able to travel without creating debt by having a solid budget. We are strong believers in zero-based-budgeting: every dollar has its place! I have been doing this my entire working career, even when I was earning $7 an hour solo. I still had an emergency fund (small, yes, but it was there) and did not carry much debt, if any. Later in life, I became familiar with Dave Ramsey and found that he also taught this method, so I feel very confident it works not just for me, but for anyone who seriously gives it a try. I also would like to point out that you will probably fail at this, or any type of budget and plan, for the first two-three months. That is OK, stay with it and find what works for you.
Zero-based budgeting means literally finding a home for every income dollar you get including regular pay, side hustle money, gifts, bonuses, etc. I use a basic Excel spreadsheet (actually, it is a Google Sheet online so I can access and adjust anytime from anywhere, but it’s essentially an Excel spreadsheet with a different name and it is shareable). When I originally set it up, I went through all of our expenses from our bank and credit card statements and categorized them: Eating out, travel, electric, gas, groceries, mortgages/rent, Rx costs, etc. I also found every quarterly, semi-annual and annual expenses, such as AAA, Ancestry.com for the hubs, taxes, car registrations, domain and website expenses, life and car insurance policies, HOLIDAYS, etc. I usually do an annualized budget because I put money into accounts each month to account for the annualized expenses, but if you are not physically setting money aside, then a month by month budget would be best for you (so you can account for the annual expenses in the month they are actually due, like around Christmas/Birthdays or vehicle registrations).
Once I have identified each area, added it to my spreadsheet and added the expense, I could easily see where my money was going. Wow! This part is always a shocker! When you think you are only eating out a few times a week, but actually see you are buying meals out 10+ times (including coffees and snacks), reality check! Total all of the expenses, then add in an “income” line with your after-tax paychecks and income. Subtract the expenses from the income line and that is how much money you have leftover or are coming up short each month. (If you need help setting this up, let me know and I can help create a budget with you!)
This is the perfect time to really analyze what your priorities are and adjust your lifestyle, whether it be cutting back on an expense category or pushing harder at work to bring in additional income.
If you have extra income, it is time to find it a home. Do not forget to include a “Fun” or “Entertainment” category, like for movies, games, concerts, parks, etc. This is great to account for and put in a savings account for when these types of things pop up. I am a very strong believer in finding excellent savings account rates to put money into designated accounts specified for very specific goals. Bankrate.com is an excellent site to find high yield savings accounts (just meaning higher interest rates on basic savings accounts), which tend to be online since they have lower overhead costs. We use Synchrony Bank online, but I am always looking for FEDERALLY INSURED AND SECURED banks to move our money too. Once you set up accounts, it is important to have your money AUTOMATICALLY go to them, either through direct deposit or by transferring it from your main bank account to the other accounts (my company only allows 5 accounts to distribute my money to, my husband’s only allows one).
Here are some of the savings goals we have based on our priorities at the present time:
Emergency fund (first and foremost, this is the most important category to have. Start small, like a couple of hundred dollars, and work your way up to 3-6 months of living expenses if one or both of you are out of work. Keep building it until you have a year’s worth of living expenses)
House Expenses (for repairs and appliance purchases, this changes as our needs change, and at one time it was a down payment savings account)
Health (for unexpected doctor visits and procedures – this is low for us since we tend to be healthy-ish people and have great insurance)
Travel (this is one of our biggest savings accounts since it is such a huge priority for us)
Vehicle (we do not have car loan payments, so we stash away money monthly like we are paying a payment. This covers repairs, maintenance and goes towards saving for a newer vehicle one day)
Life Insurance (we each have a life insurance policy outside of our work that has long term care policies. By paying annually, we save hundreds of dollars)
Vehicle Insurance (same here, by paying semi-annually and annually, we save hundreds of dollars. We put what we would pay monthly into an account, earning some interest, then pay when it’s due)
Dog Expenses (we have two fur babies and we know about how much their vet bills will be each year, so we divide it out by 12 months and put it aside so it will not be so big at the time it is due. We also have a little extra in case any abnormal visits occur)
Taxes (we usually owe a little bit in taxes each year, plus our property taxes that are not tied into a mortgage payment, so we estimate what we’ll need and save over 12 months to lessen the burden)
Of course, we each have our own retirement funds through our employers as well. If you are not signed up for your retirement fund at your job, stop reading and DO IT NOW!! Even if you can put only $5 a pay period aside, DO IT! The amazing process of compound interest will make any money you put aside grow over the years so the longer you wait to invest, the harder it will be to have the money you need when you choose to retire. If your employer offers a match, meaning they will contribute to your retirement account the same amount as you contribute, usually up to a certain dollar amount or percentage, be sure to contribute what you need to get it. It’s FREE money!! Example: My employer will contribute a percentage up to $1,200 each year, so no matter what, I KNOW I am going to contribute at least the minimum amount to get it. The ideal contribution rate is 12%+ of your income, but start where you can. By general rule, ANY dollar invested today will be worth more by the time you retire, so invest!
Along with the above, we also have some low expense ratio index fund investments through Vanguard and Fidelity that we contribute a small amount to monthly and as we have extra unexpected income. This money is at risk with the market, but the only way it will grow with the ability to earn some real money is by having it in the markets and bonds. Index funds diversify and reduce the risk vs buying individual stocks. This money is generally earmarked for our emergency fund, but we do not count it as part of the 911 fund because we cannot truly know how much will be there when we need it, just that it should be more than what we put in as long as we do not withdraw during a recession.
Tip: You only lose money when you sell your investments, so have enough living expenses (emergency fund) set aside in a traditional (but high yield) savings account to avoid withdrawing from investment accounts when the market is low so you do not lock in a loss.
If you have extra money at the end of each month vs extra month at the end of your money, create individual (actual) savings accounts and rename them to be what you are saving for so that it is off-limits unless you are spending in that category. If you can only put $5/month towards travel, or whatever account, do it! It will add up and help make that expense less of a burden, AND AVOID DEBT when you are ready to make a purchase or spend the money. Going into debt to travel really should not be an option. It can take away the fun, adds stress and makes you question what you are able to buy and spend during the trip. For me, that is extra stressful. When I travel and have no debt afterwards, it really is a vacation!
Back to the budgets.
Keep finding a home for every dollar until you are at $0 each month. This does NOT mean going and buying new toys or unnecessary things to make your money disappear. This is to create savings accounts for yourself to put the extra money so it works for you and it will be available when you are ready to make a purchase that IS necessary and PLANNED for down the road.
Example: We wanted good quality hybrid bicycles, and I knew we wanted to buy them in time for a planned anniversary trip to Fernandina Beach in May 2019, so I divided the estimated cost by how many months we had left to save, then had our money automatically move into an account to save for them. We bought them with full payment, no financing, and thoroughly enjoyed them on our trip. Knowing we wanted to buy them, we cut back another savings goal temporarily and put extra money towards them.
Basically what I am saying is have control over your finances, do not let your money have control over you. The emergency fund is the first place to start. It is amazing what happens when you have a true emergency fund set aside. Things that may be an emergency now are no longer emergencies, just annoyances. You pay for it and move on (and rebuild the account). And this helps you stay out of debt!
Find what is important to you (like travel is for us), allocate the money to save specifically for those things and put it into action!
