OFF INTO THE WILD WET YONDER How does this...
One Month Backpacking… a Lifelong Lesson
Growing up in the States during the heyday of cheap money and easy credit (save for the Paul Volcker years) was, and is, hardly the appropriate era to learn how to “save for a rainy day” as my grandmother used to preach. Modern times call for SPENDING, and whether it’s on the latest smartphone, greenest car, or hippest pair of expensive skinny jeans, young and old alike have tough choices to make when it comes to tucking some away for the inevitable. More often than not, usually that “rainy day” gets ignored, especially when one is wild, free, and/or gainfully employed.
After the financial crisis of 2007–08, many people got a rude awakening. Jobs were destroyed, easy credit dried up, and cheap money, although still flowing, was no longer doing so into the hands of ordinary Joes. In general, things were tough and cash was king—everything that grandma said about saving money and her experiences in the Great Depression rang true, and still do to a certain extent.
Having said all that, I’m a firm believer that there can never be enough advice or information on how to save a buck. And so, if you will, I’d like to ramble on about mine briefly. Hopefully it’ll be of some use. And even if it’s not the most original advice you’ll ever hear, people need to be entertained, right? As well as taught the same principles over and over in as many ways on as many days, because, simply put, the “originality” of most things really only varies slightly. There’s really not a whole lot of “new” under the sun.
The year is 1996. Cindy Crawford is a cultural phenomena. Bill Clinton is in the White House. And I am on my way to Indonesia for an entire month with a friend, a backpack, and US$1,000 in my savings account with the intent (goal?) to spend the entire amount and not a penny more or less. We planned on roughing it a bit, and one way or the other to make the best of the trip.
Don’t say it… I know what you’re thinking, “A thousand dollars in Indonesia backpacking in ‘96 doesn’t exactly sound like roughing it.” But if you factor in that we were young, single guys looking to party every chance we got, and planning to spend more than a few nights at the start and finish in the tourist trap that is Kuta Beach, Bali, well, that amount can disappear in just about the same amount of time that it took me to type this.
Because this is an article about saving money, and not a travelogue, I’ll save any crazy travel tales for another time and cut right to the moral—how did a couple of “dudes” end up coming home with a little bit of cash still in their dirty shorts? Actually, the answer came to me quite a few years later, after I had entered the world of finance. What my friend and I did (unbeknownst to us) was a variation of dollar-cost averaging (DCA). We survived by various spurts of serious fun and then making up for it with various spurts of serious downtime.
The serious downtime helped our overall budget, but also helped our overall fun maximum. We were averaging out our spending sprees by a recovery effort of only laying around our hotels, just reading and taking dips in the pool to refresh from the heat—basically an austerity plan that would make any conservative proud. We were able to maximize our fun by only paying into it periodically and this helped the overall effectiveness of our budget. This also helped us to appreciate the fun we had even more. Moreover, in my opinion, it helped us maintain lasting memories of those times because we weren’t keeping it in high gear blurring the days and nights of one month together. In general, we were averaging costs, time, and memories.
The lesson I took away from that trip has stuck with me nearly 20 years later (holy crap, 20 years?). And it’s a lesson that I still apply today, not only to my savings account but also to my investment strategy. Like compound interest, DCA is a powerful tool that can be applied in many areas of your life. And no, you don’t have to backpack the world to try it… but I suggest you do.