Last week, we drove down to Maine to visit the Acadia National park. The 7-hour road trip had to be broken down in two days, now that we have a newborn. We stayed in a bed and breakfast halfway. Once we got to our little New England getaway in Southwest Harbor, I quickly saw the beauty, enormous wealth, and charm of the region.
We drove there so we really had the time to take in the breath-taking views or the forests, ocean, and mountains. Coming in the park was astonishing. The views were well worth the $30 entry-fee we had to pay for the week.
Don’t spend it all on hotels
For accommodations, we rented an Airbnb in the harbor. It was a small cabin, off the main road, with an open concept kitchen-dinning room-living room on the first floor with a tiny bathroom beside the staircase leading to a mezzanine bedroom. The living-space must have been no larger than 500sq. ft. but it was plenty for us. The total cost ended up being around $100 per night.
Where the expenses can really get out of hand is the restaurants. This area of New England (neighboring Bar Harbour) can quickly get really expensive. People traveling there are mostly wealthy and are not shy to spend. Obviously, most places charge more for their goods and services since people are ready to pay more.
Big pockets, small jackets
You know the type, people wearing Polo shirts and S.Perry boat shoes… The ones who just bought everything from the Patagonia or North Face store to go on their first hike… Those are the ones in the fancy restaurants.
We went to one where basically every man had a polo and a half-zip sweater along with loafers or boat shoes.
Aside from that, we mainly ate at small lobster shacks or cooked our own meals at home. We tried to keep it to one restaurant outing per day.
Debt-free living with credit cards
I am taking a wild guess here but I am pretty sure that most people visiting the Acadia park area are not millionaires. My guess is that most of these expensive restaurants and hotels are mainly paid for by credit cards. And most of those expenses stay as debt. Living a life you cannot afford can be disastrous in the long-term but, unfortunately, most people live as such.
For the average American, debt is normal, debt is good; debt is a way of life.
The best way to think of your credit card is a means of payment, not a loan. Debt-free living is not impossible. You just need to see debt for what it is.
If you cannot afford it, don’t buy it. It is a simple as that. Anything that you put on your credit cards needs to be paid back.
We recommend the use of rewards cards for all day-to-day purchases simply to maximize your cashback. However, if you end up spending more than what you can afford and accumulate credit card debt, then you might be better off on a cash-diet.
Talking about diet, check out this delicious lobster dinner we cooked;
For under $10 per person, we were able to have fresh lobster for dinner. In any restaurant, it would be impossible to get anything under $30 – $40. We simply bought live lobsters from the local grocery store. Stocked up on some butter, garlic, and corn. Boiled the everything for about 12 minutes and it was deliciously easy and tasty!
Know where it is all going
For total financial freedom, you need to know where your money is going. If you are going on a vacation without any idea of how much it will cost you, what are the options, or even how will you pay for it, you definitively need a budget.
Back in the days, you would need to do spreadsheets of every single account you had and compile all of it manually but nowadays, you can let Personal Capital do it all for free! With the money-management tools offered now, it is easy to track all your bank accounts, investment accounts, 401k, credit cards, and mortgages, all in one place. It is important to oversee all your accounts as a whole to properly allocate and budget.
Never pay for a trip twice-over
With a better understanding of exactly how much you are spending and where your dollars are going, you will quickly notice the unnecessary spending that incurs each month. Once you have a budget down, you can plan for your next trip without going into debt to pay for it. Living debt-free is all about planning. Without a plan, you will inevitably fall into debt at one point.
You will quickly see that once you start thinking in years, the small things can get really expensive. Assume you pay 2500$ for a trip. Instead of putting everything on your card without even thinking of repaying it, you actually budget and are able to pay it in full on an outstanding credit card; you will save $525 of interest in a single year! (Assuming the typical interest charge of 21%) If you had kept that debt lingering on a credit card for a bit less than 4 years, you would have paid this trip twice over.
Even on the smaller scale, it can get scary. Letting that hundred dollar restaurant bill accumulate on credit can quickly add up.
Of course, you need to know yourself. If you are the kind of person who sees credit cards as an easy way to track your spending, then use them. However, if you are the kind of person who swipes away without seeing the dollars go, then cash might be better for you.
For some, cash is a way to see that they are spending.
Empty houses and ocean-front sinkholes
Driving down North Harbour, we saw some nice mansions and ocean-front estates. Some are ginormous, on endless pieces of land. There again, I doubt everyone paid for those up front.
Most people go into debt to buy houses they can barely afford. Or even worst, cottages they barely use.
This house above, for example, is not even one of the larger one. It is a 4000sq. ft. home on ocean-front property and is currently listed at $1,000,000. It seems like a bargain if you compare to New York or Vancouver but we are talking about a tiny cottage town 10 hours away from NYC and 3 hours away from the closest large city (Portland).
Buying this million-dollar property will likely require a 20% down payment, or $200,000. The opportunity cost for this alone is huge!
This could be invested for retirement or used towards buying a rental property which would generate income instead of putting so much towards a water-front home.
Your interest rate on a 30-year loan would be about 4.0%, which gives you a monthly mortgage payment of $3,800. Using the rule of thumb which states that you should not spend over 20 to 25% of your gross income on your mortgage, you can theoretically afford the house with an annual income of $182,00 to $228,000.
Again, making that much does not mean you can afford that house. It just means the banks will be happy to finance it for you.
All-in-all, we had an amazing trip to Maine. We swam in the ocean, hiked the beautiful trails of Acadia park and really enjoyed our stay there. In the end, we did not get into any debt and did not even spend a lot of money simply because we planned and were thoughtful about our expenses. Not all debt is bad, but living debt-free is just so freeing.
Get out of the hole and Consolidate your debts
Honestly, if you have large balances of student loans or credit card debts, you should shop around for a better rate. Online portals now make shopping for rates much easier and applications more convenient. The best place to start looking would be SoFi. Their online platform is easy to use and they can even help you refinance your mortgage at a lower rate.
Living below your means is not, in any way, living in poverty or eating soup every single day! Live happily, Xyz.