Article from WanderLearn with Francis Tapon |
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Most thru-hikers have a good understanding of
their expenses, know how to control them, are good at saving money, and know
how to resist upgrading. Successful thru-hikers usually follow four
steps to
prepare for and complete their journey. Let’s look at each step and how we
can apply it on and off the long distance trails.
Step 1: Know
your expenses
First, you must know your annual expenses. Add
up the amount you spend every year on all your major expenses, such as
rent/mortgage, telephone, clothes, education, utilities, entertainment,
transportation, fitness center, and booze. There are software programs (e.g.,
Quicken and MS Money) that help you figure out your annual expenses, and for
the frugal, there are free financial web sites (e.g., Finance Yahoo! and MSN Money)
as well. The super frugal can get by with just a pencil and paper! It doesn’t
matter what method you use, and you don’t need an MBA or a CPA to figure this
out. Just get a rough idea. Are you spending $10,000 a year? $30,000 a year?
$50K? $100K? More than $200K?
Step 2: Save
until it’s safe to summit
Armed with that number, you can determine when
it’s safe to summit. The more cash you have stowed away, the better you will
weather downturns. How much cash is enough? In the US, most recessions last
under 12 months. Therefore, saving a year’s worth of expenses will provide a
sufficient buffer to weather nearly any recession. Once you have that
level of protection, you can confidently adopt upgrades, as long as you
maintain that one-year buffer. You can summit without fear. As a result, you
will have the freedom to do what you love. Best of all, you’ll finally get to
buy that deluxe barbeque set that your wife has been resisting.
If you live below your means and you control
your desire to upgrade, you probably won’t notice recessions. Even if you are
laid off, you won’t have to change your way of life. If you’re used to eating
out twice a week, driving a Lexus, and schmoozing at the golf club, then you
can still do that because you’ve saved a year’s worth of expenses. Although
this will chew into your savings, you won’t have to tighten your belt (or at
least far less than those who were overextended).
On the other hand, those who constantly push
the envelope of upgrades and live on credit will have to retrench their way
of life significantly. The process of cutting back is depressing for anyone.
That’s why living beyond your means is so risky—you’re bound to get
disappointed.
Step 3:
Resisting upgrades
Most of us don’t have a year’s worth of
expenses saved. We feel pretty good if we have a month! Getting a year’s
worth of expenses saved requires resisting every tempting upgrade until your
life becomes highly inconvenient without it. Before my thru-hike I learned to
question every purchase. Ask yourself:
Step 4: Always
calculate nominal costs
Get into the habit of calculating the nominal
costs of a reoccurring expense before committing to it. Figure out how much
the subscription will cost you over a year, or even five to 20 years. When
the next salesman tells you, “Hey, it’s only $1 a day!” Remind yourself that
it’s $365 a year, and ask yourself if that extra $365 at the end of the year
would be nice to have in the bank. Or you can suggest to the salesman that if
it’s only a $1 a
day, then why not just give it away?
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