One of the key issues when planning a trip anywhere is money. “How much do I need and how do I save up for it?” This post highlights how we’ve estimated how much money we need and how we have supercharged our monthly savings without living like cheapos.
Setting a savings goal
It all starts with a goal you want to reach. Setting any random amount usually isn’t as motivating as when you know why you need that exact amount.
So how much do you need?
- Flight and other long distance traveling: this is a big block of your travel budget. Do some research on approximately how much your main/long distance flights/buses/boats/trains etc. is going to cost and add 20% for buffer.
- Day-to-day budget: this is where most of your money is going, and even though it’s not very much each day, it will add up to a lot depending on how long you’re traveling. If you don’t have a budget in mind while you travel, you’ll be amazed of how quickly your the travel account is drained. Here you need to do some research on each country/region that you’re going to visit, as the prices may differ a lot. The various travel guides can give a good estimate of the price points. Take into account the following and add up for each day you’ll be spending in a country/region:
- Sleeping: are you going for the cheapest hostels or are you doing swanky hotels? Renting an apartment can be a great way to live a bit cheaper over a longer period (>1 week) while maintaining a good standard.
- Eating: you’ll most certainly have 3 meals per day (breakfast, lunch, dinner), and some of these meals may be included in your hotel/hostel price. In addition you’ll probably have some snacks and drinks during the day. By eating like the locals or making your own food in an apartment you save some on food.
- Shorter distance traveling: you will probably need to use local transportation, such as buses, subways, trains, taxis, etc, depending on where you are traveling. Do some research and make a rough estimate.
- Extras: depending on which type of person you are you will probably be doing some activites or shopping during your trip. This needs to be accounted for in your total budget.
- Activities/adventures: snorkeling, surfing, trekking, tours, etc. With a little research you can find out which activities are popular and how much they cost. Even better, you may find a lot of fun and interesting activities that are free!
- Shopping: this can be basic necessities or extravagant luxury items. Check out the shopping opportunities ahead as well as price point.
- Rainy day extra: depending on how risk averse a person you are, you might want to include a little extra for safety buffer.
- Apartment, insurances, etc back home: unless you have sold everyting, don’t forget your life back home. This might include house/apartment costs (rent, mortgage, electrical and water, insurance, etc), student loans, telephone, other insurance. Also remember to cancel all your subscriptions and services that you don’t need while traveling.
- Buffer for when you come home and until you get your first pay check: when you return (if you return) you will have to live a little while without income, which also must be accounted for.
- Income during your trip: you might consider getting some income during your trip. This can be everything from small jobs wherever you go, to blogging, online poker or whatever. Be careful in you calculations as to how much you can expect from this.
Your next step is to start saving up to your savings goal by monthly savings. This is dependent on two factors:
- How much can you realistically save in one month? Make a rough calculation on your current budget and be sure to take any irregular/special months into account (tax returns, vacations, expected bonuses, birthdays/christmas, etc)
- How much do you need per month in average savings in order to reach your goal by the date you’ve set out for your trip?
You will quickly see whether your goal is reachable or if you need to do some adjustmenst to your daily budget (or your trip’s starting date!), which leads us to..
Tweaking your monthly budget
In order to reach your monthly savings goal, you’ll probably need to tweak your day-to-day budget (unless you earn way to much).
- First things first, if you don’t have a budget and keep some sort of accounting, you need this. Trying to save money without a budget (however crude this budget is) is like hiking without a map; yeah, you’ll probably arrive at your destination in the end, but it’s much easier and more consistent if you have a notion of where you’re going and how you’re doing so far (the latter is made possible by the accounting).
- Look at your monthly expences such as fitness centers, magazine/entertainment subscriptions, internet, etc. and ask yourself whether you really need this expence or if you can minimize it.
- Look critically at your day-to-day spendings such as food, shopping and luxury items, restaurants and nightlife, etc. and ask yourself how much you really need to spend in these categories in order to be happy, and experiment with ways to cut down on your costs. For instance, shop more food in bulk, plan your meals ahead, make better food at home instead of going to restaurants, invite friends over for dinner (they bring the wine) instead of going out to bars, and so on..
- Keep an account of how much you spend each month and how your little tweaks are affecting the bottom line. Often times you’ll find that small adjustments in many categories can have a bigger impact on your bottom line and less on your quality of life than big adjustments in one or two.
- Start putting (almost) all your expences in context with the trip you’re planning. That is, when you want a new pair of pants, the cost could compare to an awesome adventure on your trip. Often times you find that you don’t really need that new pair of pants. Also, if you’re traveling for a long time and need to stash away all your belongings because you’re renting out your apartment, think that everything you buy ahead of your trip (and won’t be bringing along) adds up to the things you need to stash away.
That’s it! This is how we have managed to double and triple our monthly savings by setting a specific savings goal as well as having the motivation (the “why”) by planning our trip, making a realistic monthly savings goal and finally tweaking our budget and thereby surpassing the goal with little effort.