2011 was a year of transition for me. I quit my 9-to-5 job in November of 2010 and have since been trying to figure out this whole self-employment dealio. Not an easy task for a guy who’d never gone more than a month without a boss since the turn of the century.
I also adopted a nomadic lifestyle in 2011. I’d only ever been to five of the world’s countries before the start of the year, but somehow managed to visit ten before another January hit, spending a week or more in seven of them.
Regular visitors to Disrupting the Rabblement will know that I’ve been tracking all my income and expenditure through this transition, and posting detailed monthly reports to show how I’m making it work. If you caught my report for December, you’ll have seen that I’m finally earning enough to cover my expenses rather than eating further into my savings.
Below I’ll share with you a summary of all my income and expenses from 2011, plus a few lessons learned and my financial aims for 2012. Hopefully all this will help some of you fine folks going through a similar transition.
|Travel||€ 2,809||$ 3,594|
|Business Expenses||€ 2,752||$ 3,521|
|Housing and Utilities||€ 2,533||$ 3,241|
|Groceries||€ 2,372||$ 3,035|
|Pubs, Coffee Shops, Restaurants, Take-aways||€ 1,216||$ 1,556|
|Clothing||€ 368||$ 471|
|Gifts and Donations||€ 265||$ 339|
|Miscellaneous||€ 1,376||$ 1,769|
|Total Expenses||€ 13,691||$ 17,517|
|Freelance web design||€ 3,445||$ 4,408|
|$50 Blogs||€ 1,255||$ 1,606|
|Gifts and Donations||€ 892||$ 1,141|
|A Course In Courage||€ 641||$ 820|
|Consulting, Training, Workshops||€ 578||$ 740|
|Affiliate Income||€ 272||$ 348|
|Google Adsense||€ 245||$ 313|
|Miscellaneous||€ 522||$ 668|
|Total Income||€ 7,850||$ 10,044|
Other numbers of interest
|Total cash and bank balances on January 1, 2011||€ 9,781||$ 12,514|
|Total cash and bank balances on December 31, 2011||€ 3,868||$ 4,949|
|Difference between those two numbers||€ 5,854||$ 7,565|
|Money spent per day in 2011||€ 37.50||$ 48.00|
|Money earned per day in 2011||€ 21.50||$ 27.50|
|Lowest earning month (January)||€ 0||$ 0|
|Highest earning month (February)||€ 1,742||$ 2,229|
|Most expensive month (February)||€ 2,021||$ 2,586|
|Least expensive month (July)||€ 683||$ 874|
I learned quite a few things over the past year as regards finances. Such as…
1. Forget passive income (at least in the beginning)
I spent the first six months of 2011 working hard to create passive income streams. That didn’t turn out very well.
While I believe it’s entirely possible to generate passive income, and plan to have another few cracks at doing so myself in 2012, I understand now that I was getting waaaaaay ahead of myself. Before I learn how to generate passive income, I first need to learn how to generate non-passive income on a consistent basis.
I feel I’m getting to grips with the latter now, but I’d be several months further ahead if I hadn’t spent so much time messing around with niche sites and the like.
2. How to save thousands of dollars a year
Simple: Quit drinking.
Apart from a few quiet months in Spain, 2011 might have been the most social year of my life. Even though I’d given up alcohol, I still went to pubs frequently, especially while in Cork, Amsterdam and Budapest. If I’d continued my usual drinking habits, I expect I’d have close to €0 left in the bank right now.
Aside from all the money I saved by giving up the drink, I also became more productive thanks to the absence of hangovers, and I developed some real confidence as regards flirting and dancing, instead of relying on alcohol to make me less self-conscious.
A few other quick tips for saving money:
- Drink water. From the tap. It’s free and perfectly healthy in most of the Western world.
- Don’t buy souvenirs. Take photos instead.
- Travel for people rather than places. Stay with friends instead of paying for accommodation. (Just try not to take advantage.)
- Don’t settle for the asking price.
- Never buy when you can easily borrow.
3. It’s not enough to be good at what you do
If you’re self-employed, it’s not enough to be good at whatever it is you do. You also need to be good at things like networking, marketing and sales. Figure all that out and you’ll have clients knocking on your door instead of you having to pitch strangers all the time.
I was frustrated for several months trying to find web design gigs. I knew I had the skills to deliver a fast and quality service, but I didn’t know how to demonstrate such expertise to the right audience.
4. Trust yourself
If you’re thinking of quitting 9-to-5 and starting to live life on your own terms, here’s the two-step plan of attack I recommend:
- Save up a year’s worth of expenses.
- Take the leap and trust that everything will be okay.
You learn fast and work hard once you give yourself no real choice but to succeed. I’m sure most folks would actually be okay taking that leap with less savings built up, but a year’s worth is good to aim for.
And by “a year’s worth of expenses”, I mean no more than €10k, regardless of where you live in the world. If you’re serious, you can get by comfortably on that without earning anything extra throughout the year.
Outlook for 2012
I feel confident now that I can earn €1k or more consistently each month, so I’m not overly concerned about income going forward. My main goal at the moment is to reduce the amount of hours I’m spending in front of the computer each week so I can get out and about more to enjoy my travels and meet with cool people. I’ve recently raised my freelance rates, so hopefully that will help.
As for expenses, I expect those to be lower for me this year since I’ll be spending several months living in relatively cheap places like India and Southeast Asia.
One thing I aim to make more of a priority this year is giving. In 2011, just a shade over 1% of my total expenditure went towards gifts and donations. I’m not at all satisfied with that number. I’d like it to be closer to 10% in 2012, and more like 20% in the long term.
Raam Dev gave me a lot to think about in this respect with his essay on Income Ethics. I especially like that he’s defined his enough ($15k per year) and aims to donate any earnings beyond that to charity.
Just imagine a world where everyone did that.
You and money
How did you fare financially in 2011? What are you going to do differently in 2012?
And have you ever considered tracking all your income and expenses like I do? Gotta say, it makes you a lot more conscious of your money. Especially if you commit to posting the numbers for the whole world to see 😉