We are continuing this series answering the question we are most commonly asked: How can you afford to travel so much? We have already done an overview post and a post on having no debt. While having debt is the great disabler of travel, this week I want to talk about the opposite of that, the great enabler of travel: budgeting.
Budgeting is a crucial principle and a component in almost every realized dream. Budgeting is simply a plan for using resources. In the context of money it is choosing what happens to your money rather than letting others choose what happens to your money. It is being proactive rather than reactive.
Budgeting enables travel at two levels. First, it allows you to set a travel goal and work towards it. Second, it helps you eliminate wasted spending so that you can save more for that travel goal.
Budgeting is not fun; I get that. Sitting down to look at all the money I am going to spend over the next month is not my idea of a good time, but it is how I am able to have a good time. Many people choose not to budget out of fear, they don’t want to know how bad the situation is, but the truth is that you experience far more fear from not knowing than from knowing. Knowing the facts might be scary, but not as scary as not knowing what you are up against.
How We Budget
You could write a whole blog on budgeting, and many people have. Here I just want to give you a basic idea of how we do it.
Budget Meeting
We hold a budget meeting together once a month. This is normally the last Monday of the month or the first Monday of the month, which ever is closer to the beginning of the new month. During the budget meeting we analyze all of accounts and categories to see where we went over and under during the previous month. We make sure that we take away and add to categories so that everything is balanced out before we start making the budget for the new month.
After we have everything ironed out from the last month, then we take the income that we made during that month and we budget it for the next month. This is a better method then trying to guess what your income will be during the month since that will never be exact. This way we can budget exactly what we have and we know that if we spend/save all the money that is in the budget we would be exactly even.
When we we budget all the money goes somewhere. Nothing is left hanging out on its own unassigned. This is known as zero based budgeting, again this is a concept we learned from Dave Ramsey. So we take all of income from the last month and every single penny of it goes into a category. This forces us to have the hard discussions about what are goals actually are and what we want to accomplish with the limited money that we have.
Budget meeting is not fun. It is probably the least fun night of every month. But what I always tell people is that budgeting does not get rid of money problems, it just consolidates them all into one night a month so that they don’t bother you the rest of the time.
Budget Software
We use the YNAB software for budgeting, and we follow the principles that go along with that software:
1. Give Every Dollar a Job
2. Embrace Your True Expenses
3. Roll With the Punches
4. Live on Last Month’s Income Today
We have an old version of the software that we purchased years ago, but it is still working for us. Now you have to sign up for a subscription to get the new software. Someday our version of YNAB will stop working, and we aren’t sure what we will do then, we might subscribe or we might use the EveryDollar app from the Dave Ramsey team, or we might do something else.
The tool is not nearly so important as the philosophy that you are implementing with the tool. The features that we need most in the tool though are the ability to plan out our budget categories, and then make entries into the budget from our phones. It is important we can make entries wherever we are so that we can get our expenses in immediately and always have an accurate idea of where we are at with our money.
Budgeting for Travel
As you might guess travel is one of our largest budget categories. We choose to devote a large percentage of our total income to travel. The important point here is that that is a choice.
Because we budget (and have no debt) we have a lot more freedom to choose what we do with our money. So when it comes to taking a trip we make a decision to either cashflow it, or tap money we have previously saved to take it.
During budget meeting we always look at up coming trips and estimate how much money we are going to need for them. Some trips are small and some trips are big, but they all basically come down to four types of spending: transportation, lodging, food, and entrance/event fees. Some of these are easy to know (entrance fees), some we can look up and plan fairly easily (lodging), and some are highly variable (transportation).
Because plane tickets can vary wildly we often wait until there is a great deal and then buy the tickets using money we have saved. We then budget that money back into savings over the months before we leave. Gas is also pretty unpredictable, but we use the website Cost 2 Drive to help us get an estimate the month we are going on the trip. You are more accurate budgeting for gas close to the time you are actually going on the trip.
Sum Up
Honestly the secret to budgeting is just to do it. It is not a fun thing to do, but it will enable you to do fun things so it is totally worth it. It honestly makes me feel super anxious when I hear people talk about how they don’t know how much they spend and how they live paycheck to paycheck. That is no way to live your life, and certainly no path to your dreams. Knowledge is power, so you need to know what is happening to your money.
If you have any questions about budgeting please leave a comment below or reach out to us at yellowvantravels@gmail.com.
