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When I started traveling, I was less worried about the money aspect (in spite of having no income), mostly because I have been adamant about safety nets since I started earning money in the first place.
I was in the same place that you probably are, wondering where all my money goes and why my savings never seems to stay saved… so I started making a plan.
How I got started
I wanted to save $10,000 within a year without adjusting my lifestyle habits too much. The best way to succeed at a goal like this is by adding an additional income rather than trying to nickel and dime your way to the top.
My full-time income barely lasted paycheck to paycheck to pay for necessities, so I knew that definitely wouldn’t work for me.
Since I knew waitressing was good part-time income, and I had some experience, I picked up an extra 20 hours a week waitressing. That worked out to about 3 or 4 nights a week.
Rather than going out and spending the limited income and time I had, getting this job forced me to get more serious about saving money. When I finished work, I had less time to spend the money I had earned, so I was saving even more. Plus, it was also a great way to add extra steps to my day.
Spend more time saving and less time spending.
Let’s diversify (and don’t worry, it’s not as scary as most people think)
Let me break down diversifying for you.
Do Not Put All Your Money in One or Two Accounts!
The best way that I can explain this is that you need to have at least 5 different accounts.
High Yield Savings around 5% (most money should go here)
Checking Account
Credit Card (I’d aim for 2)
Stock Account (s)
Retirement Account
By making sure these are well-rounded, I am never too scared about my finances, even when I’m not adding to them. I’ll go more in depth about these accounts next, so they aren’t as daunting.
When you learn to understand money, you can stop feeling like you’re falling behind and start getting ahead of the curve.
If your money isn’t making you money (even a little bit), then it’s losing you money… since it sits aimlessly in an account and its spending power decreases day after day (thanks inflation).
High Yield Savings Account
If you don’t already have your money in a high yield savings account, you’re missing out on money DAILY.
It’s free to open, and you will earn a great interest rate on it (although it fluctuate like they all do!). I used to switch my HYS account often to get the best rate, but now I tend to stick with this one since it matcehes my other accounts and usually offers a very competitive rate.
If you want the best rate, take a peek at NerdWallet, since the rates are always changing.
Put as much money as you can into your high yield account so that you can earn the interest from it (it really adds up, I earn hundreds a year with a very limited savings account).
I use Capital One for most of my banking lately (although I’m always on the lookout for better deals and moving my money around if they lose their competitive edge). This makes it easier for me to pay credit card bills and see everything in one place.
Checking Account
I also use Capital One for my general cash… but I rarely use my checking account. It’s always better to only keep money in there when you need it right away, since it’ not earning you any money.
I use this bank just to keep them all in the same place, but the checking account you choose doesn’t really matter, just make sure it’s easy to use and make transfers. You should only have one Checking Account and just use it for expenses or paying off little things.
Reminder: Keep as little money in your Checking Account as possible.
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Credit Card (s)
Don’t believe the lie that credit cards are bad. They are only bad if you don’t know how to use them, and most people don’t… so don’t be most people!
Never spend money on credit cards that you cannot immediately pay off with what you have in your checking/savings account. I usually wait until I get my interest for the month (on the 1st) before I pay off my credit card bill so that I can get extra interest from the money I plan to use to pay off my bill.
My personal favorite card is the Capital One Venture X, especially if you spend at least $400 on travel a year. I talk about this card in depth here if you want to learn why I swear by it. If you somehow spend less than that on travel annually, then go for the regular Venture One Card which has no annual fees.
Personally, I have both cards since you need a decent credit score so qualify for the Venture X card.
Credit cards are a tool, use them as such. They are much better at getting your money back when it comes to fraud or being stolen, and they offer lots of perks and ways to make money that aren’t offered with debit cards. If you live in the US, you’re at an advantage because most countries abroad don’t have access to these benefits.
Pro tip: You need to pay off the ENTIRE statement balance every month, don’t dance around the minimum payment, that’s how they get you losing money.
Rich people are not debt free, they just have their debt work for them and turn them into assets (that’s above my area of expertise , but keep that in mind!).
Stock Account (s)
Everyone is always intimidated by stocks, but you don’t have to be. You can easily automate them and never look at them. I mean it, literally never if you don’t want to.
If that sounds like you, I’d recommend Acorns which automatically invests whatever amount you want monthly and you don’t have to look at it. If you use my link you’ll also get an extra $5 that you can invest in your account.
I’ve been using Acorns for over 5 years, and don’t notice the money that comes out of my account, but love seeing the number increasing whenever I check it. You can also use it for a retirement account too.
If you want to be more hands on with your investments, but not sure where to get started, then I’d say to use Robinhood. I’ve been using that platform for more than 4 years now and it’s been a helpful way to invest.
I am not a financial advisor, but my recommendations are always S&P 500 and Vanguard Index funds. Those are easy to understand and are made up of Fortune 500 companies which have historically gone up 10% annually, giving you an average of 10% return for your money.
If you use my link to create your account, you’ll get a free stock!
Retirement Account
No one likes to think about investing in retirement, but the earlier you start the better it does, and I’m sure you’ve heard that before.
I’d recommend maxing out a Roth IRA account first and foremost. It’s about $7,000 that you can add to it annually, which isn’t all that much, but it grows a ton, especially if you start early (like in your 20s).
The annual amount you can add also goes up every year, so check the limits when you start adding. This retirement account has you pay taxes up front, but you don’t pay any when you take it out at the end.
Currently, I use SoFifor my Roth IRA because it automatically invests for me which is super convenient.
If you work for a company that offers a 401K, always take them up on it, they will usually add extra money for you too! Just keep in mind that you pay taxes when you pull that money out at retirement. This account grows your investments tax free until you take it out when you retire (then you pay the taxes).
Now that that’s settled…
Once you have these accounts set up, you can worry about money a lot less because there is always some working for you and you’re officially not behind, yay!
Get that extra income, and then start putting your travel money into your savings account so that you can start preparing for the future!
Without dipping into these extra accounts, only my checking and savings, I usually can go a good 8 months on $10,000 if I travel affordably and cut corners on accommodation (about $300/month). And I still get to do the super fun and exciting activities that tourists do in their cities, I just try to stay a bit longer and spread out these activities.
I didn’t just happen to know all of this, or get taught it at home. Most of this information I learned through personal research and trial and error. If you want to get smarter with money, these are some of my favorite books that helped me finally “get” money.
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