Wednesday, December 17, 2008

Budgeting (Part II)

[Photo: financemedia.files.worldpress.com]

Now that I’ve had a couple of months to track my spending I’m finally getting a sense of how much I will really need to finance my post-Plan life. This is definitely an improvement from my first preliminary budget. The process has been quite straightforward:

  1. Figure out what activities make me truly happy (as subjective and ephemeral as the term “happy” can be), and
  2. Draft a conservative, long-term budget that incorporates these activities

You guys can view the working draft here. A couple of thoughts:

*Anything highlighted in yellow represents fixed costs

*The Housing line-item is my pride and joy. I don’t think I want to ever pay more than $800 a month for housing ever again.

*While I already consider an annual budget of approximately $32,000 a real accomplishment for someone who somehow managed to live off a gross annual income of >$300,000 (or $190K post-taxes), there is still a ton of places where I can economize further.

*The Personal Spending, Clothing and Gear line-items are ripe for additional cuts, depending on where I am and what I am doing. You can imagine how these expenses will change and shift depending on whether I am backpacking in Vietnam, bicycling in Patagonia or teaching English in Bolivia.

*On the other hand, I have yet to include a bike expense category. Need to really think about how to incorporate my bike riding expenses into this budget. Would definitely appreciate people like Jill, Nancy, Chris or anyone else with some knowledge to weigh in on this, particularly as to how long-term bike travel adds to the budget.

Any other thoughts, comments, and suggestions very much welcome.

38 comments:

dtb said...

My husband and I actually give ourselves a meager cash allowance each week for personal spending. It has beautifully curbed the consumption of non-essential, non-joy-bringing purchases. That starbucks mochacappulatteccino suddenly seems a lot less important when you're $4 away from a pair of awesome hiking boots. (savings for these purchases are literally in envelopes in my dresser, marked "boots" "climbing helmet" etc.)

Jill said...

Hey Jack,

I've never been much of a budget keeper, so I can't really weigh in on line-item expenses. I do remember how much I spent on bike travel, because we limited ourselves to a budget of $11 per person per day. We achieved this by: a.) Mailing ourselves small portions of bulk food like beans and rice and doing a lot of cooking. b.) Limiting our meals out. c.) Limiting our hotel stays to one every 7 days. d.) Sleeping in the occasional power-line right-of-way (i.e. illegal free camping.) But we did pay to stay in a lot of legitimate campgrounds.

There was a certain poverty to living that way in America, but we had a great time and were able to travel for two months for less than $700 total. (And had no expenses back home, so that was all we needed to live.) I earned it all back the first week I was back on the job. I imagine you could bicycle travel even more cheaply abroad, and I bet there you'd become so much more emeshed in the people and the experience if you made a habit of pitching your tent on the side of the road rather than holing up in hotels.

One thing that will benefit you is getting a reliable bike and teaching yourself the nuts and bolts of maintaining it (this is something I struggle with.)

Also, you have to remember to budget more for food. If you're used to eating 2,500 calories a day, you'll need 4,000 or more, depending on the level of activity, when you spend all day biking and camping out. I consider that part a benefit. :-)

kate said...

I didn't peak at your draft budget yet, because the hobby purchases caught my eye.

I want to suggest you approach it like you will have it forever/a long time.

I am a diehard hiker and accumulated some fine equipment and clothing. I can't fathom a need to replace much of it, ever. I've bought new boots, happily -- only to find when there's a reason to use the "old ones" they really weren't so bad. I have old and new, and perhaps enough for two lifetimes.

Trust that you will be a good steward of these purchases and aim to acquire what you want, and take care of it.

My two cents.

kate

P.S. I wouldn't get anything until you know where you'll land, even if only for knowing the weather and terrain.

Anonymous said...

What are your various insurance costs based on? Why is the gym a fixed cost? How much longer will you be making loan payments?

Jack said...

dtb,

Thought about using envelopes for a while, but given how mobile I will be in the next year or so it might not be as practical.

Jill,

Thanks for the response. Wow, how do you mail yourself stuff ahead of time? PO boxes? I need to check out how much camp grounds charge for a small biker. Thanks for all the info. I definitely would love to be in touch as I plan my next bike trip. You have my email, don't you?

Kate,

Way ahead of you. I buy stuff that is durable and well-made. Initial high price for some stuff but the fact that it lasts makes it cheap in the long term.

Family on Bikes said...

I'll happily weigh in here on costs of long-term bike travel... We are now traveling on about $1500/month for a family of four - and that's fairly comfortable. We have allotted $2000/month because we know things come up - like bike maintenance and stuff like that.

If you are seriously considering traveling by bike for a long time, it's well worth it to invest in quality gear - it'll last for years and years. Yes - it'll cost a pretty penny up front, but will save in the long run. We are now using some panniers that were very well used when John and I went to India back in 1990!!

We never stay in hotels in big cities - they are too expensive. In a lot of itty-bitty towns you can find reasonably nice, cheap hotels - we don't pay more than $40 for a room with two beds - one bed would be a lot cheaper. In big cities we look for warmshowers hosts.

And we camp out a lot. I mean - a LOT. We are masters at finding places to camp - sometimes we're well hidden although only twenty feet off the road. If you keep an eye out, you can always find a place to put your tent. It's harder for us because our tent is so big - for one person it'll be easy. We do occasionally pay for an actual campground, but we don't find them all that often in the places we tend to tour.

Showers is one of our hardest issues - especially when it's cold. When it is hot, we don't mind jumping into rivers and lakes. But when it's cold - that's tough to do! There are some times when we will check into a hotel simply in order to take a shower! When it's hot but you are in the desert and there's no natural water around, you can buy a gallon or two of water, strap it on the bike, and head out of town into the desert. Then just pull off behind a bush somewhere and pour the water over your head. It's great and only costs a couple bucks - much cheaper than checking into a hotel!


Food is our biggest expense - we spend about $30/day on food. We hardly ever go to restaurants, but stop at every grocery store we find. We don't skimp on food - we've found we need good food to stay healthy, and staying healthy is imperative.

I think you'll find yourself falling into a rhythm quite quickly once you hit the road and will discover for yourself what you need and don't need.

Good luck!
Nancy
www.familyonbikes.org

LiLu said...

I am the completely wrong person to ask on HOW to save, but I look forward to learning from your experiences!

Jill said...

Nancy gave some great advice. She answered a lot of the questions I was going to touch on: Don't skimp on food and showers are optional :-) Geoff and I also took our fair share of "hobo" showers in lakes and rivers. But it's still cold water and that never gets any easier. Illegal camping also takes some getting used to. There's stress and pressure in finding a spot and staying incognito. Geoff and I were run out of a park in Missouri in the middle of the night, back when we were traveling without bike lights. There were some nights I couldn't sleep for fear the police were coming to oust us. I still think the $10-20/night you pay for campgrounds in the U.S. is more than worth it, but like Nancy said, they can be tough to find.

You can mail yourself stuff to General Delivery at any zip code in the country, and the post office will hold your package for up to 10 days. (We adhered to the time limit by having friends send the packages that we had prepared.) Geoff and I picked out random spots on a map and sometimes ended up at the tiniest little USPS shacks in towns of 50 people. We met some of the nicest postmasters that way.

I highly recommend bike travel. I'm not sure if I have your e-mail. I probably do. Mine is jillhomer66@hotmail.com.

SailingSimplicity said...

Jack, I think you could cut your budget by $10,000/year.
I did the same thing as you, and made a budget, well two; and "ideal" one and a "realistic" one....I think my "ideal" is still less than your budget.
But when you come for a visit, let me take you to check out some gear. After living out of a backpack for a few years, sleeping in canoes, tents, snow forts, boats, cars, etc. I think I might have some good ideas.
And I would like to cook you dinner too please.
I hope you are well. Still enjoying your blog.
T

Jack said...

Anonymous,

Insurance: my current monthly health insurance expenses. I know I could get cheaper, but this is as much coverage as I am comfortable with.

Gym: good point. Probably shouldn't be fixed, but I would say that I would give up a ton before I had to cut back on my gym. It's good for my health and my mind.

Loan payments: will be paying FOREVER. But law school should be stepping in sometime next year if I take a public interest job.

Jack said...

Nancy,

Thanks for the info. This is definitely very helpful. I guess I will just extrapolate costs for one person and cut back even more because if I do go biking I will probably be camping a ton. Probably be traveling like Jill mentioned. Just sent you an email btw.

Lilu,

Somehow I knew that!

Jill,

Ummm...But I guess the worst thing they could do is just kick you out and make you go on your way, huh? It might be worth it, given the amount you are saving. Though after 2 or 3 days of not showering 20 bucks for a campground and shower sounds fantastic.

The mailing yourself stuff also sounds cool. I will need to email you a little later for advice, if that is alright.

Anonymous said...

More: You can find cheaper insurance? Where? The rest of America wants to know! You could eliminate the gym and find other ways to work out and be healthy, with much lower costs. And why isn't paying off your loans something that you're pursuing more aggressively? How much of your home sale, for example, will go toward that?

Anonymous said...

Hi Jack,

I've been reading your blog and have found it quite interesting. From the comments you're getting, it seems you've really struck a chord -- you certainly have with me. I wish you much luck on your coming adventures.

I have some advice for you about your budget. It's clear you've scaled back your lifestyle, but, to me, it doesn't yet look like you're budgeting for a life of *simplicity.* For example, spending $20/month on Netflix. I know you've discussed this before, so I won't advocate giving up Netflix completely. But why the $20/month plan? I recently downgraded my 3-at-a-time plan ($18/month with tax) to 1-at-a-time/2-per-month for $5.30/month with tax. I'll save over $150/year. Even if you don't downgrade as much as I did (and, admittedly, I downgraded quite a lot) I think there's room in there for you to do some cutting. Do you really need to have 3 DVDs out at a time? Even saving just $100/year isn't chump change.

I also question spending $500/year just on clothing. My annual clothing budget would probably be half that (at most). Thrift stores, trading with others, wearing items for longer periods of time, updating my wardrobe with gifts from others, etc. Is $500/year what you expect to spend, or is that a worst-case scenario?

Are you planning on spending $300 on an iPhone every 2 years? They're great devices, but given what you've budgeted here, you apparently want to always be able to upgrade to the newest model. Why? Would you be unsatisfied with the 8 mb EDGE model for an extra year or two rather than the 16 mb 3G, for example?

Finally, are you budgeting anything for savings and for charity? Both might seem tough to do with your amount of loan debt -- something that is really unfortunate and with which so many in our generation are burdened. But I suggest that both savings and charity are important line items to plan for in advance.

All that said, there's a lot in your budget that looks great. Your budget of $800/month in housing costs is inspiring -- something I doubt I'll ever be able to achieve. And your decision to maintain your insurance is very smart. The above comments are just some food for thought. I don't mean to quibble. I really admire what you are doing, Jack, and look forward to continuing to read your blog and follow your adventures.

Best wishes,

Josh

Jill said...

Yeah, most often, all the police legally can do is kick you out, but small-town police can and often do also harrass you, search your gear, pat you down ... especially in the South, they don't seem to take to kindly to hobo hippy types, which is how they view bicycle tourists. These were just my limited experiences. I became sufficiently sketched out on illegal camping to be inclined to avoid it in my old age, although there are plenty of legal spots you can still camp for free (National Forest, BLM land, some designated town parks, etc.)

Family on Bikes said...

I should add that we don't camp illegally unless there is absolutely no way we can avoid it! We look for BLM or National Forest land - you can camp anywhere you want in those areas unless it is posted designated areas only. We don't cross fences, but look for dirt roads going back into the fields.

There are times when none of the above work - there is only private land posted with No Trespassing signs. In those areas, we stop and ask someone if we can camp on their land - they almost always let us. If there is no one around that we can ask, we might pull off onto their land and hide - but we we try really, really hard to avoid that!

Another trick of the trade is to plan it so that we pass through a town during the day and stock up with food and water - then head out into the countryside to camp. That way, you're not trying to find a spot in the city - that's always very hard to do.

We've never even been found, let alone kicked out. If you pick your spot well, nobody will even know you are there.

Nancy
www.familyonbikes.org

Jack said...

Teresa,

Sounds like a plan! Already started to buy long-term travel/hiking stuff. All I need right now is the experience to know what will last, what is worth getting etc...I am sooo taking you up on that offer of dinner.

Anonymous,

I could probably chose a Kaier or some aetna plan with a bigger deductable/co-insurance/copayment amounts in the $100 range, but I want to be careful in case something catastrophic happens, hence the $217 figure (my work health insurance will be running out some time in Feb, so this is a private health insurance quote. I actually think it's pretty expensive, but maybe I am naive.

Gym: you are probably right. I just rely on weightlifting and specific equipment that would be hard to replicate outside of a gym, but point taken.

Loans: not pursuing them more aggressively because I won't need to; my law school will pay for them once I move to a public interest job. And I suspect I won't have any earnings from the sale of the house if I actually manage to sell it.

Anonymous (Josh),

Absolutely right. As I said in the post, this is a very conservative budget that is ripe for further trimming. The thing with netflix, though, is that I am definitely a movie person. I probably watch a movie every other day if not every day. My current plan is just about right for me.

And definitely agree with you on clothing. $500 is probably the max per year; in fact, more of my clothing is probably going to come from the Gear line-item, which will decrease Clothing quite a bit.

Ipod: Good point regarding price/model, though I would add that the 2 year time frame just takes into account the fact that those devices just don't really last that long.

Savings: Another good point. The way I see it, I have some money in savings that I will never touch and will be living within my means, no matter what happens. Anything extra at the end of the year is going into the savings pot.

Charity: Is it wrong to think that I shouldn't think about charity for a while given big giveaway I put together from earlier this year? Do repost; would love to get your thoughts on this.

Miss Scorpio said...

Jack, you need to invest in resistance bands. I wasn't much of a believer myself, but after my sister introduced me to them those things can kick your butt by working your muscles in new ways. Now I won't leave home without them...they're light weight and easy to travel with and they'll save you some on the gym membership. Because seriously, if you're out seeing the world are you really going to have time to make your membership worth the price?

Anonymous said...

how much do you have left in savings?

Jack said...

Jill,

Thanks for the tip! I will see what I can do about finding just the right places to camp. Definitely not looking to be harassed, specially after I grow my requisite bike trip beard.

Nancy,

Also good stuff to keep in mind. I have a feeling most people are even glad you asked in the first place.

Miss Scorpio,

Super GOOD suggestion. Saw some youtube videos on this stuff just now. This could be the way to go...

bill h said...

I started to mention charitable giving. I really like the idea, that you give out of your income. I think it's a very healthy thing to do. Not everything could be given to formal charity, as you may in your travels find yourself moved to support or assist people whose path you cross.

Miss Scorpio said...

What can I say? Every now and then I have a moment. Make sure you get a variety of styles and resistance levels. Also, I'd recommend scheduling a session with a trainer just once to show you how to use them while you're still a member of a gym. I wouldn't want you to cause harm to yourself. I mean, you might blame me and all. :)

caseydancer said...

I just stumbled on your blog through Panther in Pumps - what a fabulous read! Really looking forward to more...

xo,
Casey
www.MyDancerDiary.com

Jack said...

Anonymous,

The short answer is that I have enough.

Bill,

Good point. I should probably include that line-item regardless.

Miss Scorpio,

Can you be ok with 1 or 2? How many do you really need for a full workout?

Miss Scorpio said...

Jack, I have three different levels of resistance (easy, medium & hard – what can I say I’m hardcore). I take it that you probably lift heavier than I do, so I’d recommend getting the medium, hard and extra hard. You can find them at Dick’s Sporting Goods, Sports Authority and even Target. I got mine at Target and haven’t had any trouble with them. You’ll want either the Rebook or Power Systems brand. They’re solid brands that won’t snap on you should you be stronger than you think. Not to mention that would sting should it hit you. Basically you can substitute the bands for anything you would use weights to accomplish…bench press, squats, tricep extensions, curls, etc. I’d also suggest a weighted jump rope.

Michael said...

I think you're totally under-budgeting food. In America $10 a day is not enough. I'm on a $15 a day food budget and its not easy. Two people at $20/day is do-able, but one person at $10 isn't. Realistically you should nudge it up to $15-$20. Besides, having higher quality food really has an impact on your mental well-being. Get a $700/mo apartment instead of an $800 on and you'll be set.


Also... $4000 on travel is not much if you plan on doing extensive traveling. I just got back from traveling in Australia and southeast Asia. (The dollar has gotten better so my calculations may be a bit off). "Roughing it" in Australia costs about $60 a day. In Thailand its closer to $40 or maybe less if you're frugal. Cambodia/Laos is even less. Remember to factor in the airfare.

::::wifemothermaniac:::: said...

Here's a blog you might like, former lawyer gives it all up to travel and surf

http://abowlofstupid.com/

Jack said...

Casey,

Thanks! Definitely come back and check in if you can.


Miss Scorpio,

Thanks for the follow up. Looks like I will be taking your advice. I still need to wait a couple of months for my gym contract to expire so I can cancel my membership.


Michael,

Interesting point on food. I think I can hack 300 but I think you are onto something. As for the travel budget, remember that while traveling my housing budget will take care o lodging and my food budget will take care of food, so all that is left is pure transportation (planes, buses, etc...)

The Traveler said...

Ah, I just love budgets! I would simplify a lot more on mine, but I suppose I might be tempted to splurge a tiny bit more if I could afford it. I love saving money though, any little way that I can. Have you read the book "Millionaire By 30," by Alan Corey? That guy sure is a penny pincher. Since you like movies, have you tried viewing free ones through www.watch-movies.net? Kinda cool site. Good luck on your budget!

LiveWorkDream said...

Ok, you asked for it.
Why is your health insurance so high? Do you need all that coverage? Don't need to be nosy, but I just wanted to mention that My hubby and I pay $161 a month total for a $7500 deductible HSA policy. It's basically catastrophic coverage, but if you're young and healthy and are willing to investigate cheap sources for any meds you might need (i.e. $4 generics), a higher deductible policy is the way to go.

And vision and dental? I'd kill it. I've been self-employed for over 10 years and have never needed the luxury of this kind of insurance, even though I have bad eyes and go to the eye doc 1x a year and dentist 2x a year. Putting my money in a savings account is a better investment, as these policies rarely pay for themselves.

The food budget seems doable to me. DH and I average about $350 a month, together.

As for the travel budget, I would up that by at least $500 a month.

Otherwise though, it looks like you've come a LONG way. Congrats!

The Traveler said...

Oops, just wanted to re-post, I was wrong about the title of that millionaire book by Alan Corey. It is actually called "A Million Bucks by 30" - I am pretty cheap, too, my budget is located at http://www.faliaphotography.com/2008/11/my-cost-of-living.html

Anonymous said...

$400 for personal spending? $80 for clothes and gear? Netflix? Fancy haircuts? How do you have the nerve to call this simple living when most of America works full time to live on a quarter or a third of your budget?

Get a pair of clippers, some excercise bands, and download videos from the internet like the rest of us.

Jack said...

Wifemothermaniac,

Interesting blog. Definitely need to check it out.

The Traveler,

Never knew about that site. I'll put it on my list of stuff to check out. Netflix can actually get expensive fast.

Liveworkdream,

yeah, mine is just 3k max per year and is pretty tight and conservative. Maybe that's just my lawyer self talking, trying to be as risk-averse as possible. I will say that I do engage in pretty dangerous stuff (biking, traveling, mountain climbing, etc...) which makes me a bit more cautious.

Re: dental, I think you have a point. Need to re-do the numbers, but I may consider the dental if I can get it lower. And yes, should increase the travel budget, but remember that food and housing should be in the same pot.

Mobile Home said...

Pity that your debt servicing takes up close to a third of your entire budget. Needing to earn net $1.50 for every $1.00 you spend on yourself is a big additional tax. I would be looking at ways to get rid of that debt as quickly as possible, if I was looking to simplify my lifestyle.

Jack said...

The traveler,

No worries. Figured that out when you originally posted.

Anonymous,

Two things: 1= this is a preliminary budget subject to change. Who knows where those line items are headed. 2=The definition of simple living will always depend on what a person considers simple living to consist of.

Since I suspect you haven't done so, I encourage you to read a bit on the vol simpl/simple living movement for some context. Just tell me, do you pay $800 for rent and utilities ? I really don't care if I live in a shack, but some people place more value in where and how they live than in how much they have in their budget for personal spending (for me it's $400 a month).

Mobile Home,

Actually, most if not all of the student loans will be paid by my law school once I find a public service job.

Nebula said...

A few polite pointers; please don't think me rude!

Cancel your gym subscription and just bike and go running each day.

Do you really need to buy clothes each month? Haven't you enough by now?

Learn how to cook, and buy groceries based on what's on sale that week. That's how I spent at most 200$ a month on groceries--then again, I'm a law student, and they feed us lunch several days a week.

Do you really need a haircut every month? I mean, I know it's healthy for hair and all, but you can afford to let it grow shaggy and skip a month--or you can also get a friend to trim your hair, or read up on how to do it yourself.

Do you watch a lot of movies? If you don't, why not just pay for on-demand for a while, and see if it comes out to more than 20$ each month?

Anyhow, those are the things I saw that could be trimmed. I have a budget, too--I try and spent no more than 50$ each week on all my expenses. The fact that most of my time is sucked up by studying certainly helps.

I love your blog, and I wish you the best of luck!

Jack said...

Nebula,

Thanks for the feedback. Some thoughts:

Gym: already on it. The thing is that all the bike does is give you cardio. Now looking to see if resistance bands can provide that added weight/strength training I need.

Clothes: Not buying clothes every month (I have a feeling you are confusing the amortized monthly amounts with actual monthly expenses; do check out the notes embedded on each Excel cell).

Food: Yeah, no one is quite feeding me at all. Plus, as a biker, I probably consume more than the average person. That being said, I can probably go lower than $300. This is still a work in progress.

Haircut: Again, not getting a haircut every month. It's every 3-4 months (again, check out the embedded notes).

Movies: :) I can tell you are new to the site. I watch anywhere from 6-10 movies a week.

Thanks for the comment and keep them coming! BTW, what law school are you at?

Nebula said...

Hi Jack!

Yeah, I'm fairly new to the website. :) I didn't notice the notes!

I'm at UChicago, and I'm in my first year. It is grueling, but interesting work.

I'm Asian, so this is one website I check for recipes sometimes--the blogger used to post lots of recipes that you could make strictly with a rice cooker and a bunch of simple ingredients, though she has started to post on food more generally these days:

http://teczcape.blogspot.com/

Epicurious is another great website--you can just type in an ingredient that you have, and then cook accordingly. This is an incredibly easy recipe for banana bread that I use a bunch:

http://www.epicurious.com/recipes/food/views/AUNT-HOLLYS-BANANA-BREAD-239027

Allrecipes is another great website, and here's a link to candied yams, something else I make for potlucks and such:

http://allrecipes.com/Recipe/Candied-Yams/Detail.aspx

And wow, that is a lot of movies! I'm glad I'm still a student--I can check out tons of movies for free from the university.

Good luck with this process, and happy late new year!

Jack said...

Nebula,

Sorry for the delay in responding. But I did want to mention that I went on epicurious and totally love it. Thanks for the tip!