We decide to start kicking our savings into high gear after our wedding in February 2012. Our savings plan didn’t have much to do with debt, but more about saving for our RTW trip. 2 years with no money coming in means that we had to put major money in the bank.
~ Here is how we did it ~
Put it on paper
The first step in making the change from spending to saving was figuring out where the hell all of our money was going! Between the two of us we bring in a good amount of money, but it never seemed like we were gaining at the bank. For the first few months, every penny we spent went into our trusty little notebook. After we had some data, we set our budgets for different categories of normal spending. For example, every month we plan on $500 USD in gas for our cars and $500 USD for groceries/household supplies. One unexpected we learned from this exercise is you can’t plan for everything! So a budget without some money put aside for life’s unknowns is set up for failure.
The biggest change in our financial situation was our approach to how we spent. Before we started saving hardcore it would be rare for me to carry any cash in my wallet, everything went on a credit card. We never carried a balance on our cards, they were paid in full every month, but even a $1 or $2 purchase would happen on plastic. It was very easy to just swipe and get what we needed, or more often wanted. We went out and got a box of envelopes and wrote down all of the names of the categories that were variable month to month and could be paid in cash.
At the start of the month, we took out the budgeted amount from the bank and stuffed it into the respective envelopes. At first, it felt strange to be using the green paper instead of the plastic we had become accustomed to. However, every time I would leave a store holding on tighter to my cash than I would have the credit card, it started to grow on me. Cash just seems so much more real, and I found it much harder to part with. The results, we hit our savings goal for the first time ever (maybe cause it was the first one we had ever set one), and we haven’t missed one since.
After a few months of living off of only cash, we felt we had learned the lessons and were ready to switch back to credit cards for everything except for our fun money. Let’s face it going to the grocery store with a wad of cash, or actually going into the gas station is kind of annoying. Going back to plastic also allowed us to take advantage of credit card rewards points which we use to help fund our travel.
Our first month back on credit cards was fine and by keeping our ‘fun money’ in cash we aren’t spending nearly what we used to. We each have an account (an envelope) where we get $25 USD every two week pay period to spend on whatever makes us happy. Hannah’s money usually goes to clothes or shoes, while I spend my money on one of my many hobbies, home brewing usually gets most of my cash. Then we also put in money for ‘Entertainment’ where we get $100 every two week pay period. We left enough so we can go out to eat once a week or meet friends out for some drinks. Budgeting is like a diet and if you don’t allow yourself some cheat money it will never work.
Along with the reduced spending in the above-mentioned categories, we had to cut some of the fat in all of our spendings. We took a look at all of our recurring and random expenses and decide which ones were really necessary. A good way to look at it is line by line, and ask yourself is this thing more important to me than being able to travel the world? If not cut it!
Our single biggest reduction was cutting the cord on the cable company. We were spending over $160 USD per month for cable and internet, with no fancy channels or anything. We dropped cable and signed up under Hannah’s married name for Internet (new customers get better deals). Our internet bill is now only $40usd / month, we did pick up Netflix and Hulu Plus for $8 per month each. Bringing our total bill to about $55-$60 per month, saving us about $100 monthly.
Other things we cut were some of the luxury beauty activities we have been doing for years saving another good chunk of money. Another place that would hurt our budget was the extras at the grocery store, we are now closer to hitting our target spending (after a lot of practice). All things considered, were haven’t missed most things as much as we thought we would, it will all be worth it as were are circling the globe!
More Reasons to Leave
It always interests me when talking taxes among other travelers to see what percentages they pay, compared to what their government supplies to its taxpayers. Before leaving we were giving the government 34% of our wages without getting our health care or university paid for. While other countries pay closer to 40% but they will never pay a medical bill or have student loan debt.
Do you have any savings tips that you think may help other travelers get enough in the bank to take a trip of a lifetime? Please post them in the comments.This post may contain affiliate links, see our disclosure