“Hi Mechanic,” my friend’s voice played over the voicemail, “I am going to Japan for six months, and was wondering if you had any advice on how to handle finances while abroad,”
My heart beat faster, excitement coursing through me. Three of my favorite things: Travel, finance, and giving actually solicited advice! Is this real life? I had to stop myself from playing the message a second time before calling her back.
I answered some questions about travel credit cards, how to get money out, how much cash to bring, and shared some stories about the worst things happening: realizing my card was expired after using up all my cash out at the edge of rural Nepal, an ATM machine eating my only card in Spain and passersby walking a wide berth around the strangely frantic foreigner outside of the bank. Hopefully these stories inspired her that you can get through these situations, which was my intent, though writing them up I’m realizing I might have just given more fodder for her to worry about.
“Okay, but how did you budget while traveling abroad? How did you know what you were going to be spending on groceries and everything when things costs different amounts?” She asked.
“B-b-budget?” The pesky “b” word. The thing I that hovered over me, something I knew I should be doing that I deftly side-stepped throughout my life. I admitted sheepishly that I had no idea how much I spent on my travels.
If you checked out The Ultimate Flowchart, you know that the first step to finance is to have a budget.
I have never had a budget.
With a stash always squirreled away, I attempted to follow a zero-based budgeting model, wherein I had to justify every purchase. I have never written down a goal-based budget like my roommate at the table, allocating amounts for food, gas, and entertainment. When it comes down to it, I think that even though it has worked out just fine for me, the idea of budgeting is extremely important. You should know where your money is going.
Recently I’ve been using Personal Capital to track my expenses. The three big competitors for budgeting tools are:
Mint was the first tool I used to link up my bank accounts and watch as it makes handy graphs and categories for your spending. It’s free and easy to use.
You Need a Budget
Many people sing praises for You Need a Budget. It centers around giving every dollar a job, so you can enter every purchase to keep track of your budget. Personally, I haven’t used it as I prefer the free tools available, as it is $7 a month.
I settled on Personal Capital for all of my expense tracking. I love it for the big picture graphs, as well as the ability to see my overall allocations. I check up on it to review my expenses. It also has handy retirement tools, including one graph that shows how much of your money will be given over to fees. Seeing the tens of thousands that were headed towards fees over time, it kicked me into gear to re-allocate my money away from high-fee funds to low cost index funds.
All three are great tools with tons of functionality, the ability to see trends over time. Since Personal Capital is what I use and recommend, here is a referral link if you want to try it out.
I will start writing up monthly expense reports as an exercise on this blog to track my spending. I think this will open up areas I could save and can see if I can cut down in some areas (I already know that the grocery bill can go down with some effort and planning). This should help me with a frame of reference as well, what are average expenses in that area and how am I doing? Are there frivolous expenses (I already know the answer is yes, I eat out too much at lunch), and if there are, how will they affect my savings in the long run? How much will short term expenses affect my long term saving goals?
Do you budget? Do you use one of the three tools in this post or something else?