A burn rate, and more specifically to this article, the adventure burn rate is the rate at which an adventurer spends money in excess of income. When you spend more money than you earn, you will eventually deplete your money to $0. The closer you get to $0, the more likely your adventure will soon come to an end.
Understanding your adventure burn rate and managing your burn rate are critical to increasing your chances for a happy and successful adventure. Correctly projecting your burn will help you plan, execute, and even extend your adventure.
Much of the concept around burn rate is financial common sense, but let’s take a little deeper look at the adventure burn rate and how it affects an adventure by examining a theoretical example of an adventure: thru-hiking the Appalachian Trail.
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Projecting the Burn Rate
The Appalachian Trail Conservancy suggests that an average hiker should budget $1,000 of expenses per month, so we’ll use this amount as we project our anticipated expensive and make a savings plan.
If the thru-hiker in this scenario relies strictly on savings to fund their thru-hike and has $0 of income while traveling, then their burn rate is $1,000 per month. If the hiker plans to take six months to thru-hike the trail, then they will need at least $6,000 in savings at the start to fund the adventure.
When planning your own adventure, research and carefully estimate your monthly burn rate and the duration of your adventure, as this will determine how much you need to save. When estimating expenses, we suggest you estimate high, versus low. If you incorrectly estimate your burn rate when creating a savings plan, you’ll have greater potential to run out of money before finishing the adventure.
Managing the Adventure Burn Rate
An adventurer must keep a sharp eye on the burn to ensure that actual expenses meet budgeted expenses. An increase in expenses might bring about a premature end to an adventure, while a decrease in expenses might allow for an extension of the adventure.
In our example, a thru-hiker can quickly exceed the average expenses by indulging in motels, alcohol, and restaurants while in town. If monthly expenses were to increase $200 per month to $1,200, then the hiker would burn through the $6,000 budget in only 5 months (5 months x $1,200 = $6,000). The hiker would need to find or earn an additional $1,200 to fund the final month of the adventure.
On the other hand, a frugal thru-hiker could find that they could reduce expected expenses by avoiding the temptations in trail towns. If the hiker reduced average monthly spend to $800, then the total costs over six months would be $4,800, leaving $1,200 to stay on the trail for another month and half or to put towards the travel nut for another adventure.
Slowing the Burn
In our example, we assumed that the thru-hiker did not have any additional income and would pay for the adventure with savings. However, adventurers may have the ability to earn income through active income streams (i.e. working a job) or passive income streams (i.e. book royalties or investments) while on an adventure, thus slowing the burn rate and making a travel nut last longer.
If our thru-hiker is able to earn $400 per month in income, then the burn rate shrinks. Spending $1,000 per month and earning $400 per month means the monthly burn rate is $600. Starting with $6,000 in savings, after a six month thru-hike, a hiker would have $2,400 left in savings at the end of the trip or could opt to extend the adventure.
Covering the Burn. Cash Flowing Adventure.
If an adventurer can earn enough income through active or passive income streams to cover the burn, then the adventure may become more than just an adventure. The adventure may become a sustainable lifestyle. This is rarefied air for adventurers, one that many covet and will likely never achieve until retirement funds become available.
At Adventure Possible, our goal is to cover the burn with passive or lightly active income streams. We discuss lots of ways that we’ve found to slow or cover the burn.
Learn some ways to make money on an adventure.