With our upcoming travel plans, I’ll be sharing more travel tips and recaps of our adventures and my husband, Tom, has agreed to share some as well. As the nerdy engineer, he made multiple spreadsheets to help plan and budget for our trip. It took a long time for us to save up and this is how we accomplished it.
When we announced to our family, friends and co-workers we were quitting our jobs to take a year and travel the world, a common response we received was, “Wow, I wish I could do that” or “How can you afford it.” The answer is that it’s easier than you might think.
Here is a list of tips we applied for funding our year of travel. However, you can apply these same tips to save for your own financial goal, whatever it may be (wedding, upcoming baby, house down-payment, tuition, boat, inflatable T-rex costume, etc.).
Like everything in life, we each only have a finite amount of resources, whether it’s time, money or energy, and it requires perseverance to dedicate these resources to those things that matter most to you. Before making a purchase for that new TV, set of golf clubs, necklace, purse, etc. stop and consider if it’s more important to you than whatever your long term goal is. We’d often stop and ask ourselves, “Is a meal at this restaurant worth a day (or two, or three) of traveling in southeast Asia?” More often than not, when framing questions this way, you’ll focus on what’s more important and prioritize your spending accordingly.
Cut Out The Little Things
Those everyday lattes, afternoon treats, and post-work beers can add up significantly. Imagine this common scenario:
|(Once a day)||(5 days a week)||(52 weeks)|
You don’t have to eliminate these little things entirely but by limiting them to a rare occasion, you will be amazed by how quickly those dollars start to add up. My grandma always said, “A penny saved is a penny earned.”
If you haven’t already, it’s also a good idea to cut out the cable man. With online streaming features such as Netflix or Amazon Prime, paying that $60 cable bill can be hard to justify. The more you take a hard look at your monthly expenses and cut out those things that don’t matter very much, the more you will see your savings grow!
Live Below Your Means
You’ll often hear the old adage “live within your means.” Meaning, only buy things you can truly afford and remain within your budget. We try to take this a step further by living below our means. Meaning, budget lower than what our income may allow us to spend. This leaves even more money to be left over and put into savings.
When we were buying our house, we were pre-approved for a significantly larger mortgage, but we chose to limit ourselves so we would spend less on mortgage payments (and consequently less on interest payments) so we could continue to save more for travel.
By following this advice, you’ll automatically live a “cheaper” lifestyle. Owning a bigger house means higher maintenance costs, more furnishings to fill the space, and increased desire for more lavish luxuries such as granite countertops. Be content with what you have, don’t concern yourself with what your neighbour has and avoid the temptation to purchase the next “new thing.”
Try Saying “I can’t afford it”
There’s often a lot of social pressure to engage in activities that can sometimes strain the wallet. Whether its a night out for drinks, a round of golf, a weekend ski trip, or just a movie date- the credit card bill can start to add up. It’s hard to say no to these events for fear of missing out or disappointing your friends. But if you simply state “Sorry, I’m saving up for X and can’t afford it right now,” you might be surprised by the response. Your friends may be in a similar situation and would rather just hang out playing board games with a bottle of wine rather than going to that fancy new bar.
You still want to enjoy life and avoid not seeing your friends ever again. So try looking for free events happening around your city to suggest alternative events or look for discounts to local eateries such as with Groupon.
Automatic Savings Deposits
Ever have that feeling of money burning a hole in your pocket? Often, if you have the cash, you’ll find a way to spend it. That’s why one of the easiest ways to save money is to automatically move it to a savings account you’ll promise not to touch until you meet your financial goal.
This is now easier than ever with payroll deductions and automatic deposits that can be setup with your bank online. We did both. I set aside a percent of every paycheck to go directly to a savings account and we had $100 automatically transfer from our chequings to a savings account each week. It was amazing how quickly the savings account grew without noticing a change in our monthly budget.
Let Your Money Work for You
As that savings account starts to grow it can begin to compound on itself if you put that money in the right place. Open up a TFSA (sorry, for Canadians only) with your financial institution and invest the money wisely. For Canadians, I highly recommend reading Canadian Couch Potato for advice on how and where to invest money to make a cautious but steady increase in your savings account. Or better yet, speak with a Financial Advisor on how they can help you reach your financial goals.
Save While the Savings Good
We have made great use of all these tips above but a significant impact has been thanks to our careers. We worked hard in school to earn degrees that gave us good paying jobs that allowed us to gain a pretty solid financial base. Working in the oil and gas industry where commodity prices are known to fluctuate and job security is not always guaranteed, I’ve naturally always set aside a little extra money to be prepared in the event of a job loss. Also, when times are good and there are bonuses, rather than splurging on something I’d really want, like a boat or camper, I’ve put it towards debt payments and savings.
If any of these tips sound trivial, it’s because they really are. Saving doesn’t have to be complicated but it does take dedication, commitment, and sacrifice to stick to the plan. Try setting up a reminder of the purpose of your financial goal, such as changing your phone background to an inspiring picture of your goal. There’s even an app for keeping your savings goals in mind.
Finally, one of the first steps to reaching your financial goals is making sure to get your expenses in check, creating a budget… and sticking to it. Tracking your expenses can be so easy now thanks to apps like this.
Happy saving and best of luck reaching your own financial goals.