Making, and managing, money on the road has a lot to do with identifying – and then controlling – some of the less obvious ways to lose your money. That’s because the cash you slide into your wallet for road trips is a lot like those Cajun boiled peanuts in the bag you have open on the tray in the dash. A peanut here, a peanut there and then you reach into the bag and you are genuinely surprised to find that there are none left.
But with a little discipline, managing your money on the road can be done – especially if you lay the groundwork before you hit the highway.
Knowing where your money goes can help you figure out how to keep more of it. Certified financial planner Mark J. Randall says, “Setting up a good personal budget is the first step to any money management activity.”
The first thing is to create a separate, job-related budget. Working within the same budget that your spouse or significant other has set up for expenses at home may be cumbersome. If you’re single, road expenses can still be treated separately from those at home.
In both cases, your running money probably comes from either advances drawn on your load’s future paycheck or by floating your own money. If you are using your own operating capital, you know your advances can’t exceed your balance. With a joint bank account, all parties need to know there will be a certain amount of money in the account for shared expenses.
Using automatic teller machines can be convenient, but make sure you keep your bank account balanced and up to date. Dependence on the automated customer service phone system to check balances breaks the first rule of budgeting – always keep your own records. Only by comparing your figures to the bank’s can you confirm discrepancies and track down how they occurred. According to the Budget Central website, which is dedicated to consumer education, “You can be in control of your money, instead of letting it control you.”
Getting advances from your company also requires bookkeeping, since you need to keep track of how much is taken out of your check in order to verify your pay. Using fleet card advances and/or ATMs can become expensive. Usage fees add up over the year. Leaving the house with enough money to cover expenses for your typical road time will save you fees and helps keep bookkeeping to a minimum.
George Muth, an owner-operator for Mercer Transportation, records every trip in a Truck Drivers’ Record Book. Because he is an owner-operator he records truck expenses and advances here, too. “That way I can see if I’ve made money on any given trip.” But as a fleet guy all you have to do is take the $38-a-day deduction for personal expenses and not worry about it. Or you can upgrade your personal operation and save yourself money by taking control. Keeping a ledger will give you the added advantage of letting you know just how much you’re spending on a daily basis, and where it is going.
If you are an owner-operator, keeping a handle on your budget doesn’t need to be much more complicated. You probably want to keep a personal budget and a separate budget for your truck. Truck expenses generally fall into two categories, fixed costs like truck payment and costs that change constantly, like fuel.
As a businessman, you have already worked out a budget based on your projected cents per mile. This projection will include both fixed costs, changing costs and a certain amount set aside for maintenance and repairs.
Budget experts will tell you eight cents per mile should be adequate for this last category. The real problem here is making sure to set aside that amount every paycheck.
Too many owner-operators do not pay themselves. Muth says, “A lot of guys live on what is left over after expenses. This means they have no idea whether they’re making money.”
Owner-operators need to budget a salary into their settlements. Otherwise there is no way to know if there is a profit. Profit and salary are not the same thing – profit is the amount over and above expenses and salary. If you are not making a profit, you might as well drive a company truck. Nor is money put aside for equipment replacement costs part of your profit. Replacement costs should be budgeted into your CPM projections and set aside in the same way you set aside money for maintenance.
Food and entertainment
Is eating eating a hole in your pocket? Muth says, “Once you’re out there the single biggest expense is food.” If you’re spending $40 a day on food and you make a grand a week, you’re spending about one quarter of your earnings to eat.
Saving receipts for every food item purchased is not necessary if you keep a ledger of these expenses. Simply break the amount spent into actual cost, tax, and tip.
The Internal Revenue Service allows you a $38-a-day deduction, but you may come out ahead if you can figure out to spend even less than that on food. Paying close attention to your daily budget will reveal some interesting things about your eating and spending habits.
You may want to consider eating some of your meals in your truck. Stocking up on food from the grocery can save you money if you can commit to it. There is the initial expense of a refrigerator and some kind of heater to consider.
But Muth admits much of the food he buys goes unused and has to be thrown out. “Besides,” he says, “you can spend as much on lunch meat and bread and mustard as it costs to eat a meal. I only eat once a day so sometimes it doesn’t pay to buy bologna.”
Meals are a form of entertainment for most drivers and often a time to socialize. It is more often than not the only thing a driver can do to reward himself for a long day. Drivers who constantly reward themselves with food can suffer health problems associated with obesity.
While it may sound like no fun to stick to a budget and go on a diet to do it, you don’t have to go without in order to limit yourself. You simply need to come up with a daily sum, say $10 less than you’re spending now, and cut out dessert. Some guys live pretty well out there for around $20 a day.
Watch out for other entertainment pitfalls at the locations where you stop to eat, especially things like video games, which can drain you of your profits before you realize. “It’s easy to spend money on meals and video games. I see guys spend a lot of money on those games,” says Kurt Steffler, an owner-operator for Jones Motor in Spring City, Pa., who doesn’t play video games and limits himself to two meals a day. “It’s expensive out here. I don’t have a budget but I watch how much I eat to cut expenses.”
Another big budget killer and potential health risk is junk food you eat while driving down the road. Those bags of chips and soft drinks in the cab of your truck you picked up at your last stop may make for a tasty between-meal snacks, but they will not only decrease your profits, they will increase your waist size before you know it.
Like most conveniences, the cell phone offers a service for which you pay. Its convenience often becomes a drain on finances, however. Like food, communicating with family and friends is one of a few ways drivers have to reward themselves. It is probably very high on your list of priorities. But you might want to budget yourself a number of minutes per month in cooperation with your family and friends who want to hear from you.
Most cell phones have a feature that allows you to check minutes. Know how many minutes you are using and what the costs are if you go over the number of minutes allocated for the cell phone service plan you have chosen.
As for other on-the-road expenses, try this. Record all your personal purchases -everything from gum to newspapers to cowboy shirts – for a week. At the end of the week, add it all up and divide everything into things you needed and things that will just lie around in the cab and get thrown out the next time you clean up. This will give you some idea where you can save and you can make decisions about how to have fun while still saving something for the future.
Most drivers who get paid by the mile are constantly calculating mileage and earnings in their heads. When your Qualcomm comes through with a load, write down the mileage, including deadhead, and keep track during the week. You will now have a handle on earnings and expenditures. Your road budget, if it is separate from your household, ought to show a surplus, which can then be funneled into a savings account or other investment. Budgets are meant to save money, after all. Once you begin to see the fruits of your budgeting, doing it will get easier.
There will always be surprises. But you can avoid some by being aware of all your company’s deduction policies. For instance, it is easy to be surprised when your company tells you they will give you $70 to pay a lumper. Some companies consider it your money and will charge you taxes even if you pay the lumper and get a receipt. In effect, it is your decision whether to keep the money and unload or pay the lumper. You also need to file that receipt from the lumper as proof for the IRS. Such surprises can be a shock. You also need to make sure that out of pocket expenses like tolls are not recorded as income by your outfit. If you don’t understand your pay stub, ask questions.
Even more important, especially if you drive for a small outfit, is to make sure you are being paid as an employee rather than a contractor. If you work for a small outfit that hasn’t done its homework, you could be caught up in an IRS feud. “Small outfits sometimes avoid paperwork and expense by paying drivers as contractors on a 1099 rather than as employees on a W-2. If they haven’t done their homework with the state tax and federal tax people, those agencies will expect an accounting from the individual,” says Paula Hudson, president/CEO of Truckers’ Home Office. If you do not qualify as a contractor but have been paid like one, the IRS will expect you to file as a contractor.
Staying organized is a big part of budgeting. You’ve got to have the right containers for your paperwork first of all. Little piles of paper everywhere won’t cut it. At tax time the organization you have done every day will be amply rewarded. A monthly envelope with the month’s total expenses in food and other road expenses is easily tallied at year’s end. Like doing logs whenever you stop, keeping up with personal expenses can pay dividends.
The Bottom line
None of this will work, however, if you deprive yourself. Modest goals for controlling expenses are best. The idea is not to live like a pauper now in order to have money left over to live and prepare for the future.
The point is to control how you spend so that you have what you want throughout your life. Like it or not, there could be times when you may not be able to work. You may not want to work through your later years. Consider simple investment vehicles like savings accounts, CDs, savings bonds and individual retirements accounts to get started.
“A budget will almost certainly leave you with extra money,” says Budget Central. And the sooner you get started, the better off you will be. Money has a time value. The longer your money is earning interest the better off you are because interest compounds your investment. As Charles Schwab, founder of Scwab Investments, says, “The best place to start is where you are with what you have.”
- Opening a checking account and savings account for your on-the-road budget will formalize the procedure and help you get serious about saving money.
- You can cut expenses by budgeting a daily amount to spend on necessities. You can probably afford to eat less than you do. Are you overweight? If you are, a budget also can help get you healthy.
- Budget a certain amount for entertainment.
- After figuring out how much you can scrape off your daily expenses, make sure to deposit it in savings. Consider your retirement an important part of your budgeting.
- Keep your pay stubs and review them periodically. Check them every pay period for mistakes and debits you don’t understand.
- Limit your phone calls in cooperation with your family. Don’t stop communicating but get everyone in on the most efficient plan.
- Make sure you know all the legal deductions.
- Save your bonus money.
- Find a conservative investment vehicle and use it.
- Work smarter, not harder. Don’t kill yourself trying to make a few extra bucks.