In show #67 Craig and Linda shared their tips for keeping a cash budget so this week I thought I’d share my own financial system. It can be done either with a cash budget or by using plastic.
Rather than taking out a piece of paper at the beginning of each month and estimating what I’ll need to live, I open up my excel spreadsheet a couple times a week and keep track of EVERYTHING I spend. If I buy a 25-cent piece of candy it goes down on the spreadsheet right next to the $60 for gasoline.
I have an overall budget for the month, but don’t break it down into categories. At the bottom of the spreadsheet is a little calculator that tells me the average amount I can spend each day for the rest of the month to stay under budget. I choose on a daily basis if I’d like to spend it on food, museums, campgrounds or something else.
Why do I like this system?
- Keeping an accounting makes it easy to go back and look at what I’ve spent money on. I love being able to make reasonable predictions from actual data. I’ve been keeping an accounting for five years now and lived in a number of situations during that time. As I plan for the future being able to look back takes some of the guesswork out of deciding what it will cost. If you are traveling between countries a lot this would be extremely helpful as you can look back at what you spent in similar situations. (I also keep track of everything I earn. If you work a lot of different short-term jobs while traveling this is also helpful.)
- Having a record is also good for non-financial matters. When I couldn’t remember the name of the really good restaurant in Santa Barbara, CA, I could go back and find it. Same for the hostel in Naples and the rafting company in Montana.
- Yes, keeping track of everything can feel a bit obsessive compulsive, but it’s really not as annoying as it might seem. I keep receipts for everything in my wallet and when it starts to get large I spend a few minutes sorting through them. I spend about 5-10 minutes a week doing the data entry.
I’d also like to recommend the book Your Money or Your Life by Joe Dominguez and Vicki Robin. They start off by suggesting you keep an accounting, but they go well beyond that. It’s an excellent book for helping to redefine how you think about money, especially if you’re trying to save up for something like travel.
Some other tips:
- Think of prices in terms of hours of work – when considering buying something ask yourself how many hours of work you would need to do to pay for it. A price tag is such an abstract concept this is a good way to solidify exactly what it means. If you had to stop and work for that long before you could buy it, would you? You might decide that while the hat is really nice it’s not four hours of work worth of nice.
- Think of prices in terms of days of travel – once you’ve kept an accounting for a while you’ll get a good idea of how much you spend on an average day. This is helpful when considering larger purchases. “Is having this camera lens worth ten days less of travel?” Sometimes yes, sometimes no.
- Just get the soup – I love good food and eating out. Part of why I choose to stay in my car rather than hotels/hostels is so I can afford to try out new restaurants while I’m traveling. That said, when you go to a restaurant ask yourself why you’re there. If it’s for the company or a chance to people-watch then don’t feel you need a full meal to get the most out of the experience. In college when my friends went out to “nice” restaurants (by college standards) my roommate and I would split a meal. We’d have just as much fun as everyone else, but spent half as much and didn’t have a box of leftovers turning into a science project in our fridge a week later.
- Give away money — I feel that as soon as I can’t afford to give money to charities and non-profit organizations it’s a sign that I can’t actually afford to travel. I pick a different place each month, usually something related to where I’m traveling. Last month I spent two weeks in Yellowstone National Park so I made a donation and became a member of the Yellowstone Association. Giving away money helps me keep in mind that it’s not about traveling as cheaply as is possible. It’s about traveling as cheaply as is enjoyable.
When traveling, things are constantly hectic and changing. Having a system that helps keep finances under control is one of the best things you can do to keep from stressing out and enjoy your travels. Find a system that works for you and keep with it.