Perhaps for some of you 6k is a drop in the hat, but my guess is that if you’re reading this blog, saving that kind of sum might be a bit of a challenge for you.
However, the reality is that almost anyone can do this. As of the writing of this article, my income fluctuates between $1,500 and $1,800 per month (after taxes). That’s around $19,000 (take home) per year. I’m not rich; if I can save a few grand in a year, so can you.
Strategy 1: Reduce Large Expenses
Saving $35 a month by not buying coffee and riding your bike to work isn’t going to get you there. Focus on the big-ticket items first. For most people, this includes auto ownership and maintenance, rent, food, and debt. Cutting back on excessive coffee and magazine purchases can help, but you’re better off doing that second.
I sleep in my truck. I know it’s extreme, but so is my dream. If you want something bad enough and you believe it can be real, you’ll find you’re willing to do almost anything to get it. If you’re not that motivated, then it’s probably not that important to you (in which case you needn’t try and make any radical sacrifices to get it).
However, there are lots of ways to lower your housing expenditures, e.g., move in with people, move home, scale down your current accommodations. Homelessness is at the far end of the spectrum, so chill.
Another option is selling your automobile.
Running and maintaining my decade old truck costs me around $500 a month. And it’s paid off. Your vehicle isn’t cheap. Insurance and gas, as well as parts and repairs, all add up. If you can dump the car, do it. That’s not realistic for me at this stage, I tried.
Finally, pay off your debt. The interest is going to cost you thousands of dollars. Make more than the minimum payments.
Strategy 2: Open up a High Yield Savings Account at a Separate Institution
When I first started saving seriously for my trip, I put the money in a savings account linked to my checking account. But you know how it goes. Your car breaks down, vacations arrive sooner than expected, insurance bills show up that you didn’t plan for, etc… And it isn’t long before you’ve used up all of your travel savings to pay for – whatever. Don’t do that.
Open up an account with an institution separate from your normal bank. Then, make a point of not electronically linking that new account to your checking account. If you get in a financial pinch, that money is both off limits and unavailable. And that’s what you want. Plus, if you can find an interest rate of .75% – 1.5% You’ll add another $50 – $100 to your account per year by doing exactly – nothing.
Strategy 3: Pay Yourself First
Got this one from Sean Ogle.
If you don’t make a point of putting the money away for the things that are most valuable to you, it will disappear. That’s just how money works.
Work out a budget for yourself that will allow you to stash a fat wad of cash away every month. Then, when you get paid, the first thing you do is put that money away in the account that you don’t have electronic access to.
Do not use this money! If the car breaks down, go out less for a few weeks. Don’t dip into your travel fund.
Strategy 4: Budget Realistically
It’s easy to crunch some numbers and come up with a budget that looks realistic on paper, while at the same time being near impossible to follow in real life. Be honest with yourself. Are you actually going to stop going out with your friends for the next two years?
I think I’m likely the last person on the Internet to say this, but use Mint.com. It’s a fast, easy, and cheap (free) way to do your budgeting with minimal input on your part.
When I first started with Mint I tried to set a budget for every single expense I had, but that quickly became too labor intensive. Plus, it made budgeting difficult because you had to plan out expenditures for 30+ different budget items.
Now, I only like to have five or six categories setup in my budget, anything more than that just takes too much time to sort through, look over, analyze, and adjust.
I essentially have my budget split up into auto, shopping (going out, buying stuff), food, bills, and unexpected expenses. When I log into Mint, I can see in a few seconds of scanning exactly where my budget stands.
Strategy 5: Sell Everything Before You Leave
Obviously this one only applies if you’re going somewhere. (Hopefully I’ve inspired you to travel by motorcycle.)
Don’t keep your crap. You don’t need any of that stuff. When it’s time to leave, sell it. You can buy more sofas, TVs, dishes, etc… If you put it into storage that’s another $80 to $100 a month you really don’t need to be spending while you’re on the road.
I sold the few things I owned that were worth money and then donated the rest to a nonprofit mission. I got a break on my taxes, I didn’t have to go through all the work of selling each individual item, and someone who needed a leg up in life got a fully furnished apartment with my stuff. Win-win.
Put It All Together
Making a few small changes in a number of areas of your life can add up to some huge savings over the course of an entire year. And, if you’re honest with yourself. Aren’t most of those fairly petty sacrifices anyway?
Put the cash away. Hit the road.