What does your lifestyle cost?

Building and maintaining a budget is an important aspect to being a financially successful traveler. The two primary components to becoming financially independent are increasing your income and reducing your expenses. By widening this gap between income and expenses, we create more money that can be saved and invested. Previously we talked about making more money as a traveler. Now let's dive into building a budget and reducing our expenses while on the road.

Living within your means

When you get your first traveler paycheck, it is an exciting moment. Realizing that you can double or even triple your income through medical contracts is empowering. However, this can often trigger lifestyle inflation, a phenomenon where your expenses rise at the same rate or faster than your income. In order to avoid this financial misstep, it's wise to establish a budget and live within your means.

How to make a budget

There are multiple ways to create a budget. You can do it the old-fashioned way with pen and paper. Or you can create a spreadsheet to itemize your expenses. If you want to automate the process, there are apps like Mint and YNAB that monitor your spending and can categorize it for you. It doesn't matter how you do it, just record all of your baseline expenses and add them up to find out what your life costs every month.

Traveler budget

Before taking a contract it's smart to make a budget for the duration of the assignment. This will give you an indication of if the contract is profitable and if you can afford to take it. This can be a simple list of monthly expenses added together. Be sure to include everything. Review your bank statements, bills, and past credit card transactions so you have a complete picture of what you spend on an average month. Do your best to collect and record all of your normal monthly charges.

For the expenses you will incur while on assignment, try to calculate expected costs, since you won't know the exact costs until you reserve housing and start the contract. You can use sources like Furnished Finder, Airbnb, and Craigslist to get an idea of how much your rent might cost at the assignment location. Take an average of at least 5 to 10 rentals in order to estimate the monthly rent (remember to update this with actual numbers once housing is secured).

A simple layout of your budget may look something like this:

Housing

- Home rent/mortgage (plus utilities)

- Assignment rent (plus utilities)

- Hotel stays while traveling to assignment

Food

Transportation

Subscriptions

Clothing

Leisure

Healthcare

This may be a challenging task for those who have never done a budget before. It's okay if you can not record every last penny, just do the best you can to get a comprehensive idea of what you spend every month and where it goes.

Once you finish your budget you can start to look at individual line items with a new lens. In doing so, you can assess what value those items add to your life. If it doesn't bring you joy or have a significant meaning, is it worth what you pay for it?

Reducing expenses

After your budget is created you can start to analyze it and see what you can cut. It is a lot easier to reduce your expenses by $500/month than it is to make an extra $500/month. First find items or subscriptions you no longer use, and immediately cancel them. If you haven't used a product or service for over a month, then it no longer serves you. Unused subscription services are parasitic to your financial wellbeing.

Next take a look at things that you won't need while you are away on your assignment. If your gym membership has a branch in your new location and you will use it, then keep it. If there aren't any gyms nearby, cancel your membership and consider doing home-workouts (Youtube has plenty of free fitness videos). Are you still paying for cable? Consider canceling it while you're away from home. Do a thorough analysis on what you won't be using while away. If you can afford to cancel it, do so and save money on those things you won't be using.

The final part in reducing your expenses will be an on-going process. There are probably some services you use that you signed up for years ago but haven't reevaluated their value in a few years. Things like your medical insurance, car insurance, and phone plan should be looked at on a yearly basis. These industries are known to slowly inflate their prices on long-term customers. Take a look at what you're paying for these services and see how you can reduce your monthly expenses. Oftentimes you can find a better plan for much less than what you're currently paying.

Saving the difference

Now that you have completed your budget and found ways to reduce your monthly spending, be sure to actively save the difference between your monthly pay and cost of living. Increasing your savings rate is the keystone to early retirement. Maybe you want to beef up your emergency fund. Or if you have access to a retirement plan, you can increase your contributions. With the additional funds, you can start a brokerage account and learn how to invest. Whatever you choose to spend the additional funds on, be sure it brings value to your life and encourages financial freedom.

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