How we saved $50,000 and are now traveling for a year
by Jason -- September 29, 2009
I’ve had a few questions recently regarding how much money Sharon and I have saved for the trip. Between both Sharon and myself, we were able to save $50,000. It’s difficult to say exactly how long this took. All of the stock I’ve accumulated with my company went into the trip savings, but roughly, it took us a year and half.
The question I’m going to answer in this post is how we saved up so much money. While this post is specific for planning a vacation (or mini-retirement), it’s applicable to saving for anything: wedding, car, house, boat, etc…
The “Twitter” answer is automation. As soon as your paycheck hits your bank account your money should automatically be withdrawn and go into your savings. Here’s how you can do that:
Step 1 – Figuring out how much you need to save
When Sharon and I first started thinking about the trip we put together the following table. This gave us a few different scenarios based on how long we were planning on staying, how much we wanted to spend per day and how long we had to save.
We ultimately decided that around $60 per day was a good amount. (Although the more research I’ve done, it sounds like this is on the higher end of how much money is needed — which is great because the money will last longer!)
This spreadsheet will also tell you how much money you need to save per paycheck. Which is the key to the next step.
Step 2 – Automating the savings
Now that you’ve determined how much money you need to save, the most important step is automating the savings. By using the spreadsheet, it will do the math for you on how much you need to save per paycheck. The key to saving, is to have it automatically come out of your paycheck or bank account, otherwise it just won’t happen.
To enable this, I recommend setting up an ING Direct account. They have pretty good interest rates, and they also allow you to setup multiple sub-accounts within your primary account. The sub-accounts are great for creating different account buckets to save for different things. For example, I had a sub-account that I saved for this trip, grad school, and a house down payment. All of these sub-accounts automatically pulled money out of my primary bank account the day my paycheck arrived.
Another great way to throw in a few bucks now and then is when extra money arrives. Your annual IRS refund is a great example or if you get a bonus from work. Even small things, like a mail-in-rebate check, you can throw into savings. These are all examples of unplanned money that your budget most likely doesn’t count on. If you can normally manage without it, why not just save it?
Step 3 – Let the automation roll
Depending on how much you’ve already saved and how much you want to save, it may take a while to get your target amount, but the great thing about this method is it’s guaranteed. Once you turn on the automation, you can begin counting down to your own dream vacation (or house, or car, or whatever…)
Feel free to leave a comment if you have any questions.
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