With the end of one year and the beginning of another we think about where we are, where we want to be, and most importantly what we want to do. How will we spend our time this next year? What will we accomplish?
Since the new year stimulates reflection and planning we thought it was time to share the back-story of how we came to live this simple roaming existence in Stan the Tan Van. When I sat down to write about living in a van, I realized there’s another story that needs to be told first. It all started way before the van. Way before becoming accidental minimalists. Way before the travel plans. It all started with a budget. Well, actually it started with the phrase, “Oh shit! How did we rack-up that much credit card debt?!?”
Our Budget Story
That was 5 years ago. It sounds like a long time, but when we think of how drastically our lives have changed since then, it’s a crazy fast transformation. We talked about budgeting for years before we actually did it. A large part of my professional job was managing budgets so it’s kinda pathetic that it took me so long to buckle down in my personal life. Sometimes you need that “oh shit!” moment to wake up.
We didn’t have any specific goals when we started budgeting other than getting out of the shackles that our debt had become. We finally created a realistic budget and most importantly held ourselves accountable for sticking to it. Getting out of debt took us a few years, but eventually we had everything except our mortgage paid off. We felt like a gate had been opened and now we finally had options.
We talked about what we wanted in life and realized that the last thing we wanted was a bigger house and more stuff. We were already fed-up with the headaches that come from owning property. I’ll spare you my full HOA rant, but a word of advice—research the crap out of any HOA you’re thinking of buying into.
Once we honed in on our travel goals, we were able to set our final debt pay-off objectives. This involved selling our money-pit of a condo. We worked to get it market-ready, while saving as much as possible every month, and dreaming of all the places we would visit.
The things we really desired in life weren’t things at all, but experiences. Yeah, I know that sounds cliché as hell, but it’s the truth. We’re the happiest when we spend time outdoors with just the bare necessities. When we’re trying or learning something new and traveling to different places.
Steps to Financial Freedom
Budgeting is all about personal finance so there are a lot of options for how exactly to go about setting-up and managing your budget. You’ll likely have to try out a few different options and tweak your tools along the way to find the perfect combination.
Whatever tools and methods you choose, here are the steps to create your budget.
- Review and document your current spending. Go back at least 2-3 months to get the full picture. Group expenses into categories and define which are fixed (rent) and which are variable (entertainment).
- Set your financial goals. This can be anything really—save money to travel, get out of debt, build a chicken coop, payoff student loans, buy a van (or house), launch a traveling mime business—whatever your passion is. Determine how much money you need to reach this goal.
- Identify categories where you can decrease spending and determine how much you will allocate toward your goal each month. Here are some easy areas to cut spending:
- Coffee shops – make your own coffee or if it’s provided at work, drink it there (sorry, I know coffee snobs are cringing right now).
- Eating out – make meals at home, bring your lunches to work.
- Groceries – we reduced our grocery bill by almost half when we started budgeting. Meal planning, buying in bulk, freezing, dehydrating, and making our own baked goods all saved us lots of $.
- Ditch the extra TV channels – this one took us a while, but we finally cut even our Netflix cord a few months ago (yeah, the whole cord thing makes me sound old).
- Gym – opt for outdoor activities or check out YouTube for tons of free workouts.
- Alcohol – this one’s pretty self-explanatory. The booze is expensive and really expensive if a bartender is involved.
- Clothing – evaluate every purchase before buying and ask yourself if you truly need it. When you do need clothing, try to find it at thrift and second-hand stores. You’ll save money and help counteract textile waste by reusing what already exists in the world.
- Personal care – haircuts, manicures, and massages all add up fast. Can you do some of these yourself or decrease their frequency?
- Build a realistic budget. What we mean by realistic budget is not just putting down ideal numbers. Put down realistic numbers and stick to them. Sure unexpected expenses happen, but they usually don’t happen every month. Also, ask yourself if that unexpected expense:
a) is truly unexpected – Have you been turning up the music when your vehicle makes that weird noise instead accepting that it needs some maintenance soon? Okay, so maybe I’m the only one that does that, but you get the idea. Plan ahead for maintenance whenever possible.
b) needs to happen right now – Of course it would be nice to replace your stinky hiking boots, but will it kill you to wait a few weeks? Trust me, deodorizing foot spray goes a long way.
There are a lot of theories about what budgeting, debt-payoff, and savings methods you should use. In our experience, there isn’t a one-size fits all solution. You need to look at different models and use what works best for you in each specific instance. We organized our debt payoff strategy mostly by highest to lowest interest rate. However, we had a smallish debt that wasn’t collecting interest yet, but could be paid off in a month so we tackled that first. Usually combining ideas from different methods will give you the most effective solution.
Here’s an even more detailed step-by-step guide for building your budget.
- Follow your budget and hold yourself accountable. You’ll likely have months where you’re over a bit in one category. Then make sure you come in under on another, so it evens out. In the beginning you should be checking your spending daily, or at a minimum multiple times a week, to make sure you’re on track with your monthly goals.
- Refine your budget and goals over time. As you progress, look for ways to decrease spending in each category and increase the amount you allocate toward your goal. Our advice is to have a little buffer at the very beginning. Maybe give yourself 5-10% more than you think you need in certain variable categories like eating out, misc. needs, entertainment, or groceries. This way you’ll ease yourself into the budgeting mindset. You’ll be successful, and you’ll have the motivation to improve your goal allocation.
We’ve tried a lot of things over the years and currently we use just two tools and spend less than 3 hours a month managing our budget.
- Mint to track our daily spending and assign categories to each expense.
- An Excel Spreadsheet to track income vs. monthly spending within each category.
Like I said above, everyone has different preferences for what works best for them. There’s a ton of info out there about budgeting. It can be a bit daunting so we’ve rounded up a few of our favorite budget tools and sites.
Apps and Online Management
- Mint (free)
- You Need a Budget (paid subscription)
Here’s a good comparison of Mint and You Need a Budget if you’re on the fence about which to choose.
Good Ol’ Excel
Motivation. Inspiration. Encouragement.
There will be times you want to quit, but I found that reading blogs, articles, and forums really helped me stay on-track and keep focused on our ultimate goals. Here are some awesome resources for budgeting and money saving tips, advice, tools, and stories.
Budgeting Can Change Your Life
Once you start budgeting, you’ll never go back. We wouldn’t have been able to do the things we’ve done and see the things we’ve seen, if we hadn’t started a budget 5 years ago. It quite literally opened a world of options for us. We still have a budget today. Our categories are much different than in the beginning and we’ve made adjustments for our new lifestyle, but we track and manage our daily spending. This will be even more important soon as we start traveling internationally.
What are your budgeting goals for the new year? Do you already have a budget? Or are you looking to start one? Do you have questions about budgeting? Leave them in the comments below.