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HOW TO: Create a Travel Budget You’ll Stick To

by Globetrooper Todd | 26 Responses
Travel Budget

I’ve heard countless stories of people traveling (often through developed countries) on very small amounts. I’ve even heard of a family travelling the globe on only $25k per year. And while it sounds great in theory, once you hit the road, you realise it’s not so easy.

Like most goals, the key to sticking to a travel budget is finding a method that’s unobtrusive, so you actually stick to it.

Doing so will ensure more travel, more fun, less worry, less work, and returning home later (if ever).

Travel Budget Fundamentals

Seasoned travellers tend to allocate an appropriate daily travel budget to each location. If they want to stay longer, simple: they find work, sell some wares, or do anything to increase total cash available.

Inexperienced budgeters come unstuck by underestimating the average cost of living. This occurs when they fix the length of stay and adjust their daily travel budget accordingly (rather than the other way around). While it’s possible to ration food and expenses to adhere to a time-frame, it doesn’t last long as the fun level dips to zero.

A Globetrooper’s travel budget has four variables:

  • Total Cash Available – the total cash available in your local currency
  • Major Transport Costs – only include airfares and other large expenses
  • Average Cost of Living – with some buffer for currency movements
  • Length of Stay – this is generally calculated from the other variables

The resultant equation looks something like the following:

(Total Cash Available – Airfare) ÷ Average Cost of Living = Length of Stay

So the main tip here is to be honest with yourself about what you need on a day-to-day basis and make sure you account for everything. It’s easy to forget airport taxes, visa fees, in-country taxes, tips, etc.

The Execution

Deciding what you have available to spend each day is the easy part. The difficult part is sticking to it. And the only way to stick to a travel budget is to monitor expenses (or go into hibernation and don’t spend a cent).

The following table shows a simple travel budget journal. You fill in the Dates, Countries and Budget columns beforehand. Then when you’re on the road, you fill in Income, Expenses and calculate the Actual balance. The goal is simple, to keep your Actual balance above your Budget.

E.g. Average Cost of Living Per Day: Australia (AUD) $50 and Vietnam (VND) $15

Date Country Budget (AUD) Income Expenses Actual (AUD)
01-Jan-11 AUD 15,000 0 0 15,000
02-Jan-11 AUD 14,950 0 45 14,955
03-Jan-11 AUD 14,900 0 25 14,930
04-Jan-11 AUD 14,850 0 80 14,850
Flight AUD→VND 14,150 0 700 14,150
06-Jan-11 VND 14,135 0 10 14,140
07-Jan-11 VND 14,120 0 140 14,000
08-Jan-11 VND 14,105 0 5 13,995
09-Jan-11 VND 14,090 50 5 14,040
10-Jan-11 VND 14,075 40 10 14,070
11-Jan-11 VND 14,060 0 10 14,060

As expected, the Actual column fluctuates around the Budget column. You don’t want to become so obsessed as to develop a routine, but you should know how close you are to what you originally budgeted. The further you are, the shorter your time away.

If your budget is $15 for the day, but it’s going to cost $100 to para glide plus $40 for lunch and drinks afterwards (as per 07-Jan-11 in the example), by all means, don’t let the travel budget stop you. Just know that you’ll have to employ some discipline afterwards to make good. That may mean cooking at home for a week or finding work to supplement your activities.

On Location

Travel Budget - Science Museum
So, we know how to budget and we know how to monitor our expenses in theory, but how does this work on location? Well, all you need is a notebook or spreadsheet. Don’t go to the trouble of recording every expense, just tally up the day’s income and expenditure acurately. You can check the numbers with your bank balance to find mistakes. More than anything, this process will teach you about your spending habits and instill some discipline.

The reason we don’t record every expense is it’s too time consuming and it doesn’t really matter. If you’re spending too much, you’ll soon realise and be able to determine what you need to do to extend your stay.

What if Plans Change?

The skill of budgeting has nothing to do with drawing tables and recording expenses. It has to do with managing unforeseen events. Your plans are bound to change, because if you’re like me, you won’t plan more than a week or so ahead.

What if I Don’t Have the Discipline?

Most of us don’t (including me). The solution is to force spending limits. Keep your money in one account that you cannot access immediately. It may be an online savings account without a key card and without physical branches. Then, open another account with a card, but without a relationship with the first bank, so it takes a few days for money to transfer.

Now all you do is transfer enough money ahead of time. Let’s say your daily travel budget is $15, you can transfer $75 each 5 days of expenses. If you have the urge to buy a Swiss watch, an expensive round of drinks, or a rare souvenir, you won’t be able to because you’ll only have $75 at most (and likely a lot less).

This may sound a little excessive, but you’ll quickly learn to plan ahead and think logically about expenditure. In cases of emergency, you’ll learn to be creative. I’ve lived like this for years, and when I really need money, I always work something out.

Posted in How-To Guides, Travel Hacking | July 28th, 2010

26 Responses to HOW TO: Create a Travel Budget You’ll Stick To

  1. I’m not traveling yet but I am working on my budgeting habit in order to fund my trip. Something that I found helpful in my pre trip phase is to tie a dollar amount to days of travel. For example, if I save $100 dollars, that gives me 4 days of freedom in Southeast Asia or 1 day in a more expensive country. That puts a positive spin on cutting back the luxuries.

    I like the tip about having a separate account to automatically transfer funds to my daily use account. I’ve actually thought about using this strategy for security reasons in case something happens to my ATM card.

    • Great idea Nick about linking your expenditure to days away.

      I highly recommend that method of separating funds. It really depends on how disciplined you are. Especially when faced with something really exciting after a couple of local brews. :)

      Love your blog by the way. Came across it a couple of weeks ago and forgot to add to my RSS. But glad you dropped by.

  2. Something I find handy is that once your budget is set at say $50/day in a country try to spend 75-80% of that on a typical day. If you can live, eat, and transport for $40/day that $10/day adds up quickly to let you do or buy bigger items when you come across them and stay within your allotted amounts.

    • Good advice, just like anything in life things tend to pop up and I’m sure it’s not any different while traveling.

    • Good point Brian; I should add that in.

      I noticed your post on Fairbanks, Alaska. We’d love to take that route depending on how soon we can leave. We’re planning to buy a VW camper and travel though Canada (possibly to Alaska) before we head to India in Feb. So we’ll make sure we keep up with posts on Alaska for tips and tricks.

      • I could read a book about this woithut finding such real-world approaches!

  3. These tips are really great. I don’t tend to record every single transaction but I do follow my daily average spending on the road. I have found that most of the times I have kept my spending on budget or under it, which is good so I can later splurge on something cool or just save it and extend my trip.
    For saving money before the trip, I usually “pay myself” first by doing a decent transfer to my savings account as soon as I get my paycheck. And a trick that I learned recently is to do small weekly transfers (say $20) to my savings, in addition to the monthly transfer. It doesn’t feel like much when you make those small weekly transfers but in time you will see how it adds up a substantial amount to your travel money.

    • Now that our daily budget is so low, I can really see the advantage of transferring even $20 every few days to a savings account. Back when Lauren and I both worked, $20 seemed so negligible. It sounds silly to hear, but it sounds even more ridiculous to say :)

  4. Nice one. I think your most important point is that when you are down to one meal a day – its just not that much fun anymore to keep hanging on. Always nice to overestimate the daily spend and be pleasantly surprised when you are out there, than the other way around.

    One thing I learned from bitter experience was to leave $1000 at home that I couldn’t get my hands on whilst traveling – so that you have something to get you going again – particularly if you are packing in your job to go on the big trip. I subtract that $1000 from any money saved before I go so it is not in the calculation.

    One of the better tips I got for pre-travel saving to empty my pockets of all change at the end of each day (and nights out) into a jar and never go to that jar to take anything out. As you don’t know how much is in there you cant add it to your trip funds and then the week before you go you can count it up. A years worth of change can add an extra $1000 to your trip funds that you weren’t counting on! Happy days.

    • Great tips Troy. I wonder how many people let over-spending get in the way of their travel aspirations. Also love your latest post on leveraging over-booking to get flight discounts.

  5. Good concept, I can see this useful for weekly budget monitoring and controls.

    Does the cost of living include your lodging? Or should it? $50/day doesn’t seem like that is high enough to include lodging. One thing that confuses and frustrates me is many hostels (and hotels) do not let you pay for your stay up front you have to pay either a deposit or for one night then you pay for the length of stay when you get there.

    I’m guessing the formula is going to look something like this Total Cash Available – Airfare – Lodging + Daily cost of living = length of stay OR I suppose you could do it this way Total Cash Avail – travel – Deposits + Daily cost of living + cost per night = length of stay.

    One other thing I should point out that really kinda messes me up is most people seem to have their budget saved and allocated, I on the other hand receive a stipend every month, that doesn’t mean I don’t have to budget because I certainly do money isn’t forever, but knowing the fact that I get a payment the next month makes it a bit easier.

    My only other question is how do I determine the base cost of living that is current?

    • Hey Shannon, great to hear from you. Those numbers were just for the sake of demonstration (but I should really update them to be more realistic). Australia is quite expensive and would require up to $75 per day in my opinion. I guess it depends where you are and how long you’re staying. We spent $14 per night for a room in Peru (so $7 each) and I think we’ll spend less than $4 each per night in India this year. These aren’t hostels by the way; nice big sunny rooms :) As for determining a base cost of living, I think it’s actually quite difficult without visiting the place first. It’s also quite difficult if you’re moving quickly between countries. That said, probably best to make an educated guess and work towards that budget and change it if you find it’s unreasonable. Now after about 7 months of straight travel, I’d have to say the best way to stick to the budget is to find enjoyment in cooking and street food and don’t get caught up going to every tourist attraction.

      • Hey Todd,

        Yeah I know the last comment was made back in November, prices change all the time.

        I realize your scenario is an example, but the point is that just what I thought there’s no way to know unless either you talk to someone who knows or who has been there recently or you visit.

        I know hostels aren’t available in all countries, but that was a given example as well. Buying a week’s worth of food is easy, getting rid of it isn’t as its not always easy to bring food through airport security.

        I went to NYC I paid maybe $1,500 for the whole trip for 3 days that included meals, lodging, airfare taxis, my NYC Attractions pass and HO/HO (Hop On/Hop Off bus pass I didn’t go see every attraction and no matter where I go I am not always interested in all the tourist attractions the only thing I can’t seem to think of is what isn’t a tourist attraction? If we’re talking about hikes, or gardens or parks (Central Park is quite the attraction unfortunately).

        I just need to be able to make sure that my available funds will be available for the entire month even if I have to sacrifice a few days of not really doing anything as long as I can eat and sleep I can do the rest when the next month rolls in. I just don’t see how I can do that with my first vagabonding in Alaska though :(

  6. thanks for this article, I am right now in the preparation and planning stage, awaiting my request for a sabattical to be approved fingers crossed, and basically thinking ‘where do I start?’ . I was going to look at budget, time away, where do I want to go and what do I want to achieve. Is there any reference you recommend for me to have food for thought on my planning stage as well as this good advice on budget?

    • Hi Charlotte, it really depends where you’re going. In some places, you really don’t need to think twice. You can spend on whatever you like and at the end of the day you’ll only be $10 worse off. Then in other places, you can conceivably also live on $10/day, but the city and the food and the activities make the default level of spending much higher. What I’ve found is that most cost-of-living guides on the net don’t tell you how you’ll really spend.

      That said, your main decision is how long you want to travel versus where you’d like to go. If you want to travel for a year, you really need to be conscious of spending on a daily basis. Whereas, if you currently work in a good job and are just planning a 2 month trip, you can generally not worry too much because you’ll be back home before you know it earning more money. For us, we’re travelling indefinitely, which can get a little scary at time. Knowing that we’ll never get a pay check again makes us very aware of spending.

      If you’re on a relatively tight budget and mostly interested in Europe, then I think you ned to plan very seriously. On the other hand, if you’re travelling through Asia, you really don’t need to worry. Throughout India we found accommodation for under $5/night and meals for $1 or less. With those numbers, it’s very easy to catch up. We’re now in Berlin, and while it’s surprisingly cheap for Europe, it is still Europe. So while we can live cheaply, we have o be aware because we could easily spend 100 Euro in a night. That’s virtually impossible in rural Thailand or rural India.

      Hope it all goes well. Just try to find a balance between managing your money and not stressing about it to much. Destination plays a huge part.

  7. Fantastic site. A lot of useful information here. I’m sending it to several buddies ans also sharing in delicious. And naturally, thanks in your effort!

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  9. Awesome post. Lots of food for thought in there. I just posted on how to actually stick to your budget once it’s created. Thought it would make a nice complement to this article! Hope you don’t mind me sharing.

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