If you’ve been thinking about retiring or just moving overseas, you’ve almost certainly thought about your household budget. However, aside from a single line item on your household budget called something like “spending money or “cash” I’ll bet you haven’t given much consideration to your personal budget, aka personal spending.
In case you don’t know what I mean by personal budget, I mean all of those things you buy out of your “spending money” as part of your routine for the day, week, or month.
Often, many of us spend that money on things like your morning bagel, lunch, or afternoon snack while you’re at work. Believe it or not, those things (and the associated routine) are probably part of what make you happy (or at least non-suicidal) on a day-to-day basis.
Have you ever said one of the following (or similar) statements?
- “I can’t live without my Starbucks in the morning”
- “I don’t have time for breakfast before I leave for work, so I grab “xyz” on the way”
- “I don’t like to pack a lunch, the office fridge is disgusting”
- “Ugh, I need to grab a Redbull. That 1:00 meeting kicks my ass”
You get the idea.
So, have you really thought about how much you’ll need once you’ve reached your goal of moving overseas? Or did you just pick a number out of what’s left over every month on your budget spreadsheet to make the numbers work out?
Ask yourself: Is it really enough?
I know how it is, you’re moving overseas and you’re going to be on a fixed (and likely reduced) income so you’re really being careful to make sure the basics (room, foot, transport, etc..) are covered. But what about all the little “extras”? Can you live without them?
Figure out your personal budget now: Step 1 – Figure out where you spend your money
All you have to do this is sit down and HONESTLY figure out what you spend your personal money on now. Do it once for each work day then go back and do it for each weekend, week, and month. Next, add it all together and figure out how much it is on average per month. It doesn’t have to be fancy, just honest and fairly accurate.
For example, when I did mine, I come up with the following…
- Lunches at work: $12/day on average, 20x/month- $240/Month
- Afternoon soda (2x/week): $4/week – $16/Month
- Pizza night with the guys: $10/week – $40/Month
- Beer meeting after work: $12/week – $50/Month
- New video game: $40/Month
- Movie Tickets: $10/Month
My total is $396/Month…. wow!!!! That’s the money I spend every month as part of my normal routine without even thinking about it. OUCH! – I had no idea.
If you’re having trouble remembering everything you spend $$ on, consider writing it down for a day, week, etc.
Figure out your personal budget now: Step 2 – Figure out what you can give up
OK, now that you know what you’re spending your personal money on currently, what can you give up and still be happy. That last part is important as you’re not going to like your retirement or relocation abroad if you can’t afford to treat yourself – at least occasionally.
For me, it’s fairly easy as a lot (but not all) of my personal expenses are caused because of work and I’m planning to either work from home (where the grocery budget will soak up some of it) or just not work. In addition, one of my bigger expenses (Pizza) is because of my current group of friends. Once I’m 1,000+ miles away, that won’t be happening any more.
So, here is my list of things I can cut out:
- Lunches at work
- Afternoon sodas
- Pizza night with the guys (won’t be around them anymore)
I imagine I’ll still enjoy the occasional beer and I’m not planning on giving up my games, so I’m going to leave them on my list. Taking the above things off my list, the load on my personal budget drops to a mere $100/Month. That’s only about one quarter of my current personal budget
Now, before you say it, I understand that there will probably be new things that will make it into my personal spending, once I get to my overseas destination. I agree. However, until I’m there, I don’t know what they will be.
Don’t worry about it at first, I’ll address that in step 3 (below).
Remember, the whole point of this exercise is to get you thinking about what you spend now to keep yourself happy, what you’ll need to spend overseas to help get into a pleasurable / comfortable routine and keep yourself happy, joyous, and free.
Figure out your personal budget now: Step 3 – Figure out what you really need, don’t skimp
This step can’t really be done accurately until you arrive at your overseas destination but you can start with a placeholder amount. I would recommend 150% of your adjusted budget from step 2 to start.
Once you get there, figure out what your new personal budget should be based on what you actually need to spend after adjusting to your new lifestyle. I would recommend you wait until the second month to do so, since your first month will be an adjustment period.
DO NOT SKIMP!!!! (But don’t go nuts either)
If you skimp, you are not going to have an enjoyable overseas experience. Worse, you’ll be homesick by the third month and wondering if you made a mistake. The point is not to deter you from moving overseas but to help you take a realistic look at what you need in terms of personal spending.
Well, I hope this post made you think about your personal budget and how important it will be to your happiness during your overseas experience, whether you’re retiring or just relocating.