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I’m constantly amazed by the people who ask us how we live the way we do, in complete disbelief that it is possible. They usually have car payments and lots of other consumer debt on their plate but they also have income from a job. They’ve just never thought of using that income to direct their lives onto a different path. Here is a list of all the ways we save up the money we need to travel, we’re not rich but we worked hard and try to do the right thing with our money – always.
1. If you are a couple ‘Live’ on one income
If you are a couple you have a unique advantage – the possibility of two incomes. We were child-free when we started saving so we had two full-time incomes. In the beginning, we saved the smaller pay cheque (mine) and ‘lived’ on the larger one (Dave’s) but we eventually got to the stage where we were saving my pay each week and 30% of Dave’s – saving is addictive like that. It took sacrifice and a lot of cost-cutting but we look at the freedom we have now and know it was worthwhile.
When I say ‘Living’ on one income that means saving the other. Completely. Whether you ‘save’ by paying down debt or building up a savings account is up to you. When we had consumer debt like credit cards and personal loans we used the second income to pay those off. We knew that credit card interest was anathema to long-term travel.
Once all of our consumer debt was paid off we channelled those funds into a high-interest savings account. The funds began to grow, after two years we had paid down debt of over $20,000 and saved nearly $80,000.
‘Living’ on one income also helped us adjust to maternity leave as we never saw the second income – so never felt our lifestyle changed hugely when Dylan was born – I did miss seeing the savings account balance grow, though. It’s how we will always live now, whether we are travelling or at home.
2. Cut your expenses
Everyone knows that cost-cutting is one of the most important things you can do when saving for anything. I’ve always been frugal with grocery shopping and utilities but our biggest cost-saving was living in a shared apartment. For four years we shared a big two bedroom apartment with a good friend. The weekly rent was $400, of which we paid $215 as we had the bigger room. This alone allowed us to save over $38,000 compared to renting the apartment as a couple. The weekly rent was less than 10% of our total income and enabled us to get a huge head-start on our wealth building mission.
Now we have a child house-sharing isn’t really an option but I urge anyone without kids to seriously consider it as a way of cutting costs.
When we purchased our first home we made sure we could afford the mortgage payment on one income. That meant we had to buy an older home in a grittier area, that needed some cosmetic work. It wasn’t (and still isn’t) pretty but I doubt we will ever experience mortgage stress.
3. Increase your income
Be open to different ways of making money – even when I was in a well paid, full-time corporate job I still took part in focus groups and online surveys for extra cash. I worked behind the bar at events and also worked part time in a music store on weekends. Dave accepted any overtime work that came his way.
Yeah we paid a lot of tax – but got most of it back when end of year tax returns were submitted and we earnt and were able to save a hell of a lot of money when all our incomes were combined.
As we got older and began to invest in property we drew more income streams from them however in the beginning all our savings were from jobs – lots of them!
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4. Get every extra dollar you can
I’m talking tax returns, bank fee refunds, cash back offers on purchases, cash-back credit cards. There are so many ways to get more money without doing too much work.
Tax returns have always been big earners for us so we try to submit them as soon as possible to get our funds earning interest right away!
When Dylan was born we were granted a Baby Bonus from the Australian government which we used to open a savings account for him.
5. Budget – to an extent
To create our budget we worked out how much we actually needed to live for a year including rent/mortgage, insurance, utilities, groceries, transport, pocket money (for fun stuff) and clothing. Our income has no bearing on this number – although it must be below the amount of the income we are ‘living’ on. Then we set-up an automatic transfer from our savings account to our bills account for the monthly portion on the first of each month. Our paychecks are then deposited directly into our savings account. We never have to ‘survive until payday’ as we pay for the month in advance.
I tried to use YNAB (You Need a Budget) as it seems a really good system but I can’t be bothered tracking every single purchase. Update: June 2015 – I’ve just resumed using YNAB – you can read about my experience with YNAB here.
I truly believe that once you start saving everything else will fall into place, you will become more conscious of every dollar and where it is going. The habits we formed while saving for travel have allowed us to become financially sound at a very young age while enjoying the world and all it has to offer.
What are your top savings tips?[themify_author_box style=”gray rounded” ]