With our initial plans made for a life of full-time travel in 2016, there’s one salient question on our minds: how much is this all going to cost?
Without any experience living as full-time travelers, we’ve found it difficult to answer this question – especially in light of our flexible itinerary and desire to see a variety of places around the world. Van camping in Utah may cost next to nothing, while exploring museums and historical sites in a European city could work out to ten times the daily price.
Unlike many people in the personal finance community, I’ve also never used a budget to control my expenses. Instead of attempting to hold myself to an arbitrary dollar amount in each category, I’ve found it simpler and more effective to monitor my total spending each month and adjust accordingly.
Setting a target
Rather than disingenuously trying to craft a category-by-category budget for our full-time travel life, we’ve started by evaluating a spending level with which we’re comfortable – effectively asking, “How much can we afford?” Amusingly, this is the exact opposite of the approach I’ve taken for years as I’ve worked toward financial independence. Pre-FI, this line of thinking keeps most people from ever reaching their financial goals. Want to buy a house? “What’s the biggest one the bank says we can buy?” Eyeing that new luxury SUV? “How much does the dealership say we can afford?” In ordinary life, this approach leads to low savings rates and endless lifestyle inflation.
Now that we’re not earning full-time incomes, though, I think it’s important for us to establish a ceiling for our annual spending – not only to help us monitor how we’re doing, but also potentially to inform our future destination choices.
We’ll use the 4% rule of thumb as a guideline for a sustainable level of spending, though it certainly won’t be an unbreakable constraint. Can you imagine? “Sorry, I know we traveled all the way around the world to be here, but the 25 Euro admission fee to the ancient Greek city of Ephesus would put us beyond the 4% rule this month.”
After evaluating my portfolio, my prospective rental and side hustle income, and our overall risk tolerance, we’ve set an annual spending budget of $40,000. That’s $3,333 per month, or $1,667 per person per month.
I hope we end up beating our spending target by thousands of dollars, but we’ve tried to be realistic – understanding our penchant for dining out and knowing that at least in 2016, we’re not going to be truly “slow traveling.” Depending on how much side hustle income we’re earning, this could result in a withdrawal rate well below or above 4% – yet another component of full-time travel life that we’ll have to figure out along the way.
Evaluating our fixed and variable expenses
While we don’t plan to hold ourselves to a categorized budget, we can project our fixed expenses with reasonable accuracy – though there really aren’t that many of them with a location-independent lifestyle:
|Home||$0||$0||The joy of nomadic life|
|Vehicle Registration||$125||$10||Tabs for the van|
|Insurance||$610||$51||We'll look into reducing this expense when we park the van during periods of international travel|
|Bills & Utilities|
|Health Insurance||$2,760||$230||HDHP premiums|
|Mobile Phone||$545||$45||Projected Google FI expense with 2 GB of monthly data; actual amount will vary based on data usage|
|Bank Fees||$66||$5||HSA maintenance fees; I've looked at maintaining the minimum cash balance to avoid these, but I'd rather have that money invested in the market|
|Attractions||$85||$7||America the Beautiful pass for National Parks and NFS/BLM land|
|Total Fixed Expenses||$4,191||$349|
We’ll categorize all our other variable expenses as follows:
- Van expenses: Fuel, maintenance and repairs, parking, tolls, and any other van travel-related costs
- Transportation: All non-van transit expenses, including airfare, trains and buses, rental cars, and Uber and taxis
- Food and dining: Our biggest vice! Groceries, restaurants, bakeries, breweries, and bars
- Lodging: Campsites, hotels, hostels, and B&Bs. We’ll also include gifts for hosts in this category
- Attractions: Museums, parks, historical sites… anything with an entrance fee
- Entertainment: Any other amusement expenses. Everything from tickets to concerts and shows to rental fees for bikes or kayaks to ski lift tickets
- Miscellaneous: Everything else. Health/personal care, miscellaneous shopping, and gifts and donations, among other items
With a total budget of $40,000 and fixed expenses around $4,200, that leaves us with $35,800 for all our these variable items. In shorter timeframe terms, we’ll have ~$3,000 per month – just under $100 per day – almost entirely at our discretion.
Achievable? We’ll see! I don’t think we’ll have any trouble coming in under budget when we’re camping and hiking for weeks. On the other hand, we know from experience that lodging, food, and attractions can eat up a ton of cash when traveling internationally. Whether we’re crushing our budget or embarrassing ourselves with an exorbitant outflow of cash, we’ll plan to share our experience and learnings here.