Budget...not sure yet but here's what we do know!
Everyone asked me what I thought it would cost for our family to venture out for a full year with no real income (only savings) and I really had no quick answer. Trying to shut down life financially is really complicated. So far we have compartmentalized our financial transformation into three steps to manage the process as well as we can. It's a starting point for us anyway and any other folks considering this type of adventure. I admit that it's a pretty drastic change from our typical american lifestyle where most times we don't track spending or savings...we just wing it. With dual income and some discipline that might work for most and has for us. Now we are taking the approach a new retiree will have to go through when they all of a sudden transition to a fixed income.
The first step is to stop spending money on anything that is not consumable or mandatory for your trip. Do this immediately when you decide to leave employment much less engage in costly travel. Erica and I were really inspired by the documentary, Minimalism: A Documentary About The Important Things, which we saw shortly after deciding to take this leap and travel small. There is no doubt that we are living a minimalist life style now and that documentary helped us figure out how to purchase much more wisely than we had prior. The question we kept asking ourselves everytime we went to a store (mostly Amazon) was; What purpose does this new item serve and would it be critical to have on our trip? This is similar to the minimalist approach where they ask themselves a modified version; What purpose does this new item serve in my overall happiness? We found that our purchases became much less because our impulse buys, especially at our guilty pleasures Costco and Target no longer stood up to the question. No we don't need the really cool kitchen gadget or the extra seasonal home decoration for the front yard that will then have to be paid for once over in storage costs when we leave. I could write a thesis on the trap our culture is in of buying pointless crap that ends up in basements, garages, donation bins or the dreaded pay-for-storage unit (that is a financial disaster for a family). I hate that we are paying to store our current prized possessions and they are really important to us...but I'll save you that soapbox!
Check this out...you'll get the point!
The second step was eliminate all debt. Everything must go! If we don't own it then we never did and we can live without it. We started this step way before (like 3 years ago) our trip. We rented our home in San Diego (it was really easy to walk away from) and owned our vehicles outright (we sold both to stash the cash and used most of the proceeds to buy the Honda CRV that was already equiped for towing from Erica's parents), but we do still have federal student loans that we placed into deferment for 12 months beginning this month. We haven't had any other structured payments in quite a few years and we had to pass up any expense that would need financing for the last two years. All federal student loans have deferment periods, typically up to five years, for financial hardships. Our decision to quit our jobs created the loss of income needed to qualify for this deferment program. We will re-evaluate the deferment in 12 months and then begin repayment again or defer another 12 months. There is no penalty to pay ever and the only downside is interest continues to accrue at our current interest rate of 3.25% while in deferment. We see this as justified by keeping our cash on hand and invested at a cheap cost of financing. One last piece to acknowledge here is that our temptation to overbuy an RV that was newer, bigger and with more amenities was put to the no debt test and we were grateful to purchase our 2005 Coachman Freelander, Class C with our savings and stay away from the debt of something much nicer. We sought out an RV that hit our few requirements like three separate sleeping quarters, clean interior, V10 Ford Triton engine, and lots of storage to take our necessities with us. Had we over-bought we might have needed more time to get it paid off and we found anything that delayed getting on the road as not worth it.
The third step is save as much cash as you can. Steps one and two will help this dramatically. Erica and I have been surprised by how much money we were able to sock away over the past year. We also invested this savings in some investments I felt were safe to gain some modest returns. The investments were a calculated risk that has turned out to help our savings nest egg grow even better than expected due to the strong performance of financial markets everyone has enjoyed for the past two years. Obviously the more you pocket away the more time you can spend on the road or the the more costly experiences you will get to do. Another side note here is a significant mindset shift happened for us. It was the idea of spending money that we previously had earmarked for our later retirement and the fact of it being spent now is hard pill to swallow. This is a process that creates a lot of anxiety for us, me in particular, and I have lost sleep worrying about it. This is difficult to divert from our long term financial plan but our mid-life retirement and our justification of YOLO (You Only Live Once) was what we kept and continue to tell ourselves. You are trading the time together now while the kids are still captive to our family for what would be tough to duplicate in retirement when our kids are adults and have lives of their own. We also have begun to feel better about working longer in life anyway because we want to and truly enjoy the purposeful work we do.
Our starting budget is $3000 a month or roughly $100 a day. We'll see...
Peace and Love!