By: MJ + PJ
Disclosure: Any affiliate link embedded in this post marked with (*) may generate a small commission for our website. Any commission earned is a simple way for us to subsidize maintaining this website.
[This is quite a thorough post – we figured it would make more sense to have it as one rather than a split topic you had to click or swap between on different posts.]
GUIDING QUESTIONS
- Who wants to be a multi-millionaire?
WE DON’T!
- Who wants to see the world with flair?
WE DON’T!
- Who wants to travel for as long as they can and see as much as they can and see what the world has tucked away in its many corners at the most reasonable price and without accumulating more stuff?
WE DO!
In the First World it is easy to participate in materialistic tendencies, and it is amazing how much of your money can go towards non-essential luxury items. We are just as susceptible to and guilty of this as the next person on our street, in our town, in our state, and in our First World country. Examining a few leaves from the Third World book shows us that the buzz word and trend of ‘minimalism’ is arguably neither – it’s how most people lived most of the time throughout history: being resource savvy. Unfortunately, this contrast reveals to us that the taste of feeling rich and satisfied is easily fed by resource accessibility and affordability… at the cost of opportunity.
THE GENERAL APPROACH
A year or two out from your travel opportunity you want to set up a solid financial plan or approach to eliminate your debt and to create a budget. In a nutshell, actively earn and save for travel by building habits and/or maintaining accountability. Or stated otherwise: You need to build various assets and then not spend them! Now we are over the main conceptual hurdles, what did this actually look like for us?
REDUCE DEBT AND SPENDING
It is, of course, impossible to spend nothing and save everything. The more practical side of debt elimination is a question of value – consider habits and realism, and weigh up the value of travel and experience versus having stuff of a particular quality or brand. Value, like beauty, is in the eye of the beholder.
Reduce in any way that you can: Consolidate credit, shred cards, shed accounts, refinance property, eat at home, brew your own coffee and beer, retreat from underutilized paid associations and organizations, don’t expend on others that which you value but they don’t, find another way to do the same thing cheaper, read the labels, calculate price/amount ratios, bide your time to purchase, look for discounts, use discount codes, ask – don’t assume, etc.
Essentials are clearly essential, but how different are those things with a glossy label and fancy font to the generic looking item on the shelf below? Many goods with different labels and slightly different constituents are made on exactly the same premises and with the same raw materials. Are you buying a profit margin or reputation in addition to the packaged product? Sometimes it is wise to buy a more expensive type of product, but wisdom is neither linear or purchasable.
Hit up those thrift stores for things that serve a need but are not expected to be of a particular quality! Without denying the influence of fashion: How you wear what you wear is the lesson from the catwalk. Thrift stores are where we did the majority of our shopping for clothes and many basic necessities. This has been a habit since over a decade ago when arriving in California, well before any adventure like the current one was on the horizon. We are very fortunate to have had amazing thrift stores local to where we have lived. One of PJ’s friends sent her this meme because it made her think of PJ:
Also, think about how reusing something from a thrift store is making an impact on our environment. We were shocked when we started clearing out our house to see how much “stuff” we accumulated! Four garage sales didn’t get rid of it all! Actually, it was embarrassing and quite frankly shameful. It made us think of every household in the U.S. and what the impact would be to our landfills if people just threw stuff away instead of reselling or giving it away to those who need it.
BUDGETING
How else do we find out what to reduce? The elephant in the room here is to figure out your budget. Each budget is unique, but priority and frugality is the key to the door for saving: A saving oriented budget is a question of needs versus wants. Personal scrutiny and asking hard questions, despite the discomfort, is essential when budgeting and looking at what you have and use and do. A budget draws a nice line in the sand.
Another way to sort out your finances (besides getting a financial advisor/accountant) is to look into FREE electronic resources. These resources help you to get a snapshot of all your finances in one place. Once set up and linked to your (hopefully not too many) accounts, it will help you determine your net worth and create a realistic tailored budget. We recommend:
Both of these electronic options provide dynamic insights into your finances but do not actually make you save or reduce. It’s the framework, but not the work – just like a budget is a plan that you have to act on, not just make and put on the fridge. These Apps also provide access to financial advice services if you are interested. Obviously, there is a fee if you choose to utilize these expanded services.
Besides digging into chapter or electronic based resources you can simply kickstart budget awareness and action by asking some age old general questions:
- In order to save, how much do we reduce what, and where?
- Why are we currently paying for item or service x, y or z?
- Do we really need to have a, b or c?
- Is there a cheaper option than 1, 2 or 3?
- How much do we need by when to enact our goal?
- What are we going to do about it today, tomorrow and next week?
EARNING
If you can create a passive income through your line of work, do it! If you can’t, then you should think hard about what you can substitute. Since both of us come from front-line healthcare, that ‘passive income thing’ is very challenging. But there are retirement funds, and this does provide future income based on growth without you doing much. NOTE: We are NOT using our retirement funds to finance our trip. These will remain invested in order to grow our retirement portfolio.
We had different jobs, but both in healthcare which is not a great industry for income growth. Being in information technology would have been ideal, but we would both have gone crazy. The changes in Medicare over recent years meant that many healthcare systems were being squeezed tighter with the “accept less reimbursement and make less mistakes or we’ll reimburse you less” cost reduction tsunami. Which is not a very sustainable approach beyond the initial trimming of errors and fraud, and sadly creates an environment of uncertainty.
Regardless of such scenarios, you make the best of what you have and move within your profession where and when you can. Any bonuses need to be utilized to eliminate debt or invested/saved, rather than viewed as a reward.
We also liquidated passive or silent assets into cash. Apply the 80:20 rule aggressively – 80% of what you use is 20% of what you have. This means sell some things you are not using regularly: like the stuff you don’t even realize you have. We had a few (!) garage sales, and hit up the community selling portals hard. Clearly this type of earning is only sustainable to the point of running out of physical assets. However, think about all the “stuff” you are not using in your household – that, my friend, is hidden cash!
Essentially, we let the established passive income roll in, made the best of what we were getting, sold off material items, and focused on cash saving more.
SAVING
There are expenses whichever way you look at the equation. This now comes down to behavior and values and pertinence – what you spend your money on is your choice.
Our biggest saving initially was refinancing our house. This consolidated debt (small student loan and credit card) into one payment with an average lower interest rate. We saved by not paying interest to several different banks. Now the only debt we had was our mortgage, and we had already built a lot of equity.
Key point here – Over the past 10+ years, we had been pumping a lot into retirement funds and investment accounts (basically living off of one income & saving the rest), but living until your retirement funds are accessible is not guaranteed. So, we re-evaluated our goals and tapered off those retirement contributions to save directly into post tax accounts. Our retirement savings will still continue to grow, and we will eventually start contributing again once we settle in Australia.
Another option is passive saving using *Digit: Smart Money Sidekick. This App/Program analyzes your checking account to determine how much you could be saving based on historical use/data. It then transfers small amounts into a personal Digit savings account. You can set a baseline balance that you wish to keep in your checking account and it will not go below that set amount. Utilizing this type of passive savings allowed us to save thousands of dollars just by transferring a few bucks here and there without even thinking about it. Granted, when your checking account balance is high, Digit will adjust the amount transferred respectively. There is a small fee for this service of $2.99/month, and you can easily transfer cash back into your checking account. Transferring cash as well as performing other actions (i.e. save more, pause savings, balance requests, etc.) can be completed via text messaging the app. Very user friendly!
TRAVEL REWARDS
This may seem counter intuitive… but find a credit card that earns travel rewards and use it to pay for as much as you can. A few examples are the Capital One Venture cards or Chase Sapphire Reserve cards. Pay it off in full each month – remember your budget. This is key! We have never paid interest on our travel rewards credit card because we are strict about paying off the balance each month. Live within your means and use those reward miles!
INVESTMENTS
Decide what you are going to do with assets and property and investments. Consult with experts on this. We sold off concrete assets within our home. We did not have additional property, but if we did and it was paid off we wouldn’t have sold it, but rather rented it out… because that’s passive income. We managed our investments to better serve our plan.
SUMMARY
There are many ways to earn and save and reduce the cost of living, and there are practical ways to curb spending. The big goal we had was to reduce spending and increase saving, but continue living with less costly pastimes. That meant sticking to a plan that would enrich a value that we had.
It takes a few years of a finance habit to really see the benefits of saving and the true cost of spending. This is easier to see with the vision provided by a budget. Making a budget involves asking some hard questions, but a budget keeps you accountable to your values. It is easier to budget by using some concrete tools to monitor your progress, and then using gains observations as motivation to fuel your adventures.
To browse over some graphs and other data related to this adventure please visit out 365 Data Page! If you want to dive deeper, check out the daily spreadsheet, which has further insights into how to use it in this post!
