I’m all about automation. Maybe it’s because its ingrained in me from working with enterprise systems or maybe its just the immense satisfaction I get from making things more efficient. Either way, I try to automate everything in my life that is feasible.
When I’m not traveling, my money manages itself. I have a system in place where I receive money into a checking account, have my bills timed to be paid a few days after I get my paycheck, and then have money pushed to a savings account and retirement account. It’s no-touch, simple, and effective. The extra bonus is that I keep my checking account with a relatively low balance, psychologically tricking myself into believing that I’m short on cash. If there’s money in my checking account, I’m allowed to spend it; if there’s not, I can’t.
So as we get ready for this trip, I’m looking to see how these principles can be applied to different spending patterns. I know I can estimate average daily costs for different regions or countries and with that can adjust automated deposits to a “daily spending” account. If I get this right, we’ll be in the same position – if I have money in the account I can spend it and if I don’t, I can’t.
So where do we start? We’ll keep the majority of funds in an interest-bearing account. Of course, the best account to keep our stash would be the one with the highest interest rate. However, with interest rates as low as they are right now, it’s just not worth moving my business to a new entity for the sake of a few bucks. And what’s the difference? For us, (at 60k in savings and a difference in rate of .50% over 6 months) about $100.
If this is important to you and are looking to shop around, check out the following savings account options (rates as of July 2013***).
- Ally (.84%)
- State Farm (.30%)
- USAA (.10%)
- Capital One (.75%)
- EverBank (.75%)
- SmartyPig (1.00%)
- AMEX (.85%)
- Schwab (.12%)
You may also consider a high-yield checking account or a CD based on your needs.
In our scenario, all the cash will be held in a savings account and we’ll release a certain amount every week based on location. So how does this work? We’ll assume for this scenario that Kris and I are starting from the same savings account (in actuality we saved separately). So based on where we are traveling, we need to assume daily spending habits. I created a massive spreadsheet for estimating daily spending by country… we’ll get into the details on this later, but here are the assumptions for this purpose.
- Western Europe – $90 / day / person for 2 weeks.
- Eastern Europe – $60 / day / person for 3 weeks.
- Africa – $60 / day / person – for 5 weeks.
- Southeast Asia – $40 / day / person for 10 weeks.
- Australia & New Zealand – $80 / day / person – for 6 weeks.
Now, we need to make that cash available when we need it and only when we need it. Since we are sourcing money out of a savings account we’ll need to limit the withdrawals per month. We don’t want to use up all 6 allowed withdrawals for normal transactions (in case of emergency), so let’s set up the withdrawal on a weekly basis.
- Set automated transfer of $1,260 ($90 / day * 7 days / week * 2 people) for the 2 weeks of travel.
- Set automated transfer of $840 for the 3 weeks of travel.
- Set automated transfer of $840 for 5 weeks of travel.
- Set automated transfer of $560 for 10 weeks of travel.
- Set automated transfer of $1,110 for 6 weeks of travel.
So now we’re all set! Am I too focused on the detail? Is all this unnecessary? I’m not sure. For me, I like the idea of knowing how much I have to spend within a smaller period of time. Over a 6-month trip its too easy to get sucked into the thought process that “you’ll cut back spending next week” and that “this big purchase is a good idea” or “we’re keeping track of every dollar we spend, we’ll figure it out”. Make it easy on yourself. Make it so you can look at how much is in your spending account to determine how much you can spend. You know when the next deposit is coming in and you know for how much. You don’t have to track every single penny that is spent. This approach will save you time (and money) and make managing your travel finances effortless.
*** Bankrate is a good source for up to date interest rates. http://www.bankrate.com/