Home for the Holidays?

What about the bills ….

By Timothy D. Brady

One of the biggest challenges, especially during these financially difficult times, is for any single-pony motor carrier or for a lease operator to take some time off the road and spend it with their loved ones during the holidays.

One thing about freight and freight lanes, they never seem to coordinate themselves with the time a trucker wants or needs to be at home. This is particularly true when it comes to the holidays and being home is the objective of many over-the-road truckers.

As a self-employed individual, how do you plan and save for a vacation?

With some planning and forethought, being home for the holidays, taking that dream ski trip to Aspen, or that long-awaited family Christmas with the Grandparents can be reality. So what’s the secret?

You use the same plan and methods you use to set up your repair reserves, emergency funds or tire replacement accounts. With planning and discipline, by this time next year you can be prepared to take that long-desired extended vacation. And it won’t throw your income into a tailspin.

Step One in developing your plan: you have to know what it’s costing you to operate your trucking business day-to-day. For the purpose of your vacation goal, you need to know your daily fixed costs. These are the business expenses that occur when your truck is parked. They would include lease or truck payments; cell and business phone, business insurance, base plate, permits, FHUT, accounting fees, health and disability insurance premiums, and your salary or draw for driving the truck. By knowing these figures and calculating them from an annual total to a daily total (completed by dividing your annual Fixed Cost total by 365), you now know your daily fixed costs.

Step Two in the process is to determine the number of days you’ll be on vacation.

Step Three: add 10 additional days (5 days before your vacation and 5 days after its end) to compensate for the loss of hauling revenue from having to be home on a specific date to start your holiday, and to ‘get back into the cash flow groove’ upon your return from that holiday.

Step Four, multiply the total number of vacation days, including the 10 additional ones by your daily fixed costs. This total is the amount of cash reserve you’ll need in your business savings account at the time you plan to take your vacation.

In Step Five, take the total of this cash reserve, add it to your annual fixed cost figure, and divide by 260. This new total will be your new daily fixed cost. This is the amount you need every day, 365 days a year, to pay all your fixed business expenses, personal home expenses, and provide you with a Vacation Cash Reserve. Please note: this cash reserve is solely for covering all your truck business expenses and personal salary or draw while on vacation and while getting back into the swing of the business upon your return. It’s separate from any emergency or other funds you may have set aside. The funds needed for the vacation itself (plane tickets, hotel, etc.) is a completely separate savings plan, which is handled in the same manner to cover those expenses.

Here’s an example of how this works.

Let’s say:

1. Your Annual Fixed costs are………………………$38,000
2. Your Annual Driver’s Salary is……………………..$40,000
3. Total Annual Fixed Costs…………………………  $78,000
4. Divide Annual Fixed Costs by…………………………260 Days
5. Fixed Cost per Day………………………………$     300
6. Number of days on Vacation  + 10………………….20 Days

(In this example, 10 days’ vacation + 10 ‘get back into the cash flow groove’ days)

7.   Multiply Total Vacation Days

By Fixed Cost per Day ($300)………………………..$ 6,000

is the Vacation Cash Reserve needed

8.   Add the Vacation Cash Reserve to the

previous Total Annual Fixed Costs…………………..$78,000

9.   The New Total Annual Fixed Costs

including the Vacation Cash Reserve………………..$84,000

10. Divide the New Annual Fixed Cost by…………………….260 Days

11. The New Fixed Cost per Day required…………………..$324

12. The difference from the old Fixed Cost……………….. $(300)

and the New Fixed Cost per Day…………………………..$24

is what is needed to save per day to be able to take a paid vacation next year.

Or you can figure you’d need to set aside per week…………………$120

This is the amount you’d add to your weekly Break-Even Point to be sure you meet your Holiday savings target.

As you can see, these are manageable amounts of cash, and with due diligence and some dedication you can cover the cost of owning your truck and the money you need at the house so you can truly enjoy a worry-free vacation. For what amounts to pocket change, you can create memories which don’t involve the truck. And I’m sure your significant other will appreciate that.

Good roads, good loads, and home for the holidays.

Timothy Brady © 2011     Contact Brady through  www.timothybrady.com/contactus
For more information on Trucking Business Courses go to: www.truckersu.com