Planning a Travel Budget that Works: Day 7 of 30w30d
07. Sep, 2009 
17 Comments
This post is part of 30 Ways in 30 days to Redesign Your Life and Travel the World. This series seeks to give you the practical, real world steps you need to take to get from wherever you are, to exactly where you want to be– traveling the world and living the lifestyle you want.
Planning a budget is a very personal matter– it’s about money, our money and how we plan to spend it. There’s no shortage of advice on the matter– quick how to’s to turn your paltry salary into millionaire’s escape– or stern warnings about the importance of tracking every penny. The real trick though, is there is no trick.
The best budget is the one that is simple enough that you can memorize it.
Here is the dilemma: if you plan a complex, detailed budget, you may have accurate day-to-day numbers but unless you then record every penny you spend against your budget, the tool is meaningless. In other words, if you create a budget to plan and control costs, but don’t use it once you’re traveling you’re only getting half the value. You’ll fail to control your costs. What good is it to say, “I plan on spending $50 a day” but then run around and spend $75 a day. Did creating that budget help you?
The second dilemma is that most budgets micro-manage your activities. Will you be going to the museum? Taking a bus to the ruins? Renting a car to tour the country side? How do you know? If you do know, we really need to talk about your level of travel spontaneity. The truth is, no budget is going to be very accurate, unless you’re willing to make some major flexibility sacrifices. Wouldn’t a rough idea and complete autonomy be more ideal?
If you’re going to create a simple budget, where do you start?
Most long term travelers have a sense of how much they can afford, and manage these details in the back of their head, perhaps having a running total for the day, or week and confident that any overspending can be made up elsewhere.
But if you’re getting started, and need to plan how much to save, where do you start?
First, you’ll need to know approximately what the cost of living is in the area you’re traveling to. The method I use is to look up the average cost of a hostel. Even if I’m not staying in a hostel, it’s valuable to use this as a benchmark for a few reasons:
- it’s available internationally in virtually every country of the world
- you can use a single website to look it up
- the numbers are always up to date
- it’s the cost for a traveler to stay there and generally at the same level of quality so you’re comparing apples to apples
- it tends to reflect the cost for someone traveling on a budget– whereas a hotel cost can fluctuate wildly based on quality.
Could you use the cost of living index? Yes, but I don’t, because I think it generally takes into account what it costs to live somewhere as a local, verses to travel through. You won’t be buying a house or doing all your shopping at the market, so I prefer to sample the cost from the travel market instead.
Once I have the average cost for a hostel, I multiple that number by 3. That’s my per day budget.
Avg hostel cost per night X 3= Accommodations + food + other expenses
So if the hostel cost $20/night, I’d have a budget ($20 X 3) of $60 a day. This gives me:
$20: accommodations
$20: food
$20: whatever else
If I decide to rent an apartment for the month, I need to find something for less than $20 X the month (30 days)= $600. If I go over on my food costs, I’ll have to cut back from my “whatever” bucket.
“What! This will never work!”
This is the typical budget that I use, and I have a certain standard of living. You may be able to get by on a factor of 2 or you may need at least a factor of 5. I would suggest that whatever factor you use, to do a detailed budget for one destination to put the theory to the test. Compare it to the hostel cost in that area and create your own factor. The advantages are that you will always have a quick way to figure out the cost of going somewhere (valuable if plans change on the fly), and you’ll be able to keep these numbers in your head. The practical application is that you’ll always know where you are financially.
Making this work on the road
If you know that you’ll be spending $50 a day for the week, I will take out the entire week’s worth of funds at one time (to save on ATM fees) but only carry on day’s worth of cash on me at any time. If this isn’t possible, I’ll keep a running total for that day in my head, and plan my spending based on what I have left. If I know that I’ll be going out that night, I’ll keep my food costs a bit lower. If I’ve come to the end of the week and I’m ahead, I’ll splash out on something nice– maybe that great restaurant I had been eying up or rent a vespa for the day.
Exceptions
Little expenses, like taking a $12 ferry somewhere, can usually be absorbed into your budget and made up for over a few days. However, what if you’re planning on flying? Or taking a $400 sailing trip? Or signing up for language school? I would get hard costs for these items, budget for them, but don’t track them on a day-to-day basis. When it’s time to pay for it, do so, but don’t deduct from your daily budget.
Advanced planning for the long term traveler
Once you have a handle on hour much it will cost by destination, you’ll want to look at your overall costs. Is it averaging you $25/day? Or $75/day? Is the total amount, much too much? One way to balance your spending is to offset those high cost destinations with multiple days in low cost areas. For example, you may spend 3 months in Europe, but offset that cost with twice as many days in somewhere like Central America or SE Asia. For me, it’s worked out to a rotating schedule of roughly 3 months expensive, 6 months cheap. Based on your priorities, this may look different, but it’s a way to keep costs down if you’re planning long term travel.
Homework
1. Test the theory. Create a detailed budget of what you think it will cost for one of your destinations (or use something that you’ve already created). Divide the daily cost by the cost of a hostel for one night (you can look up hostel costs at hostelbookers.com or hostelworld.com– be sure to sort by price) and this is your factor. Round to the nearest whole number.
2. Create your travel budget. Using the estimated daily costs by destination, also be sure to include the big ticket items separately. Your budget might look something like this:
- Destination X, 1 weeks: $30/day ($210 total)
- Destination Y, 2 weeks: $40/day ($560 total)
- Destination Z, 3 weeks: $50/day ($1050 total)
- Flight from home to X: $660
- Scuba lessons: $400
Grand total: $2880 for 6 weeks
3. If you’re looking to manage costs, look at whether adjusting your travel schedule will work (if it feels okay, but don’t ruin your trip by being stuck somewhere you don’t like). For example, if we flipped the last example budget to spending more time in the cheaper places, then it would look like this:
- Destination X, 3 weeks (was 1 week): $30/day ($630 total)
- Destination Y, 2 weeks: $40/day ($560 total)
- Destination Z, 1 weeks (was 3 weeks): $50/day ($350 total)
originally: $43/day
now: $36/day
Additional Reading:
40 Most Useful Travel Websites That Can Save You a Fortune
The Per-Diem System Is a Seriously Easy Budget to Follow
A budget is extremely important, I am glad you touched on it. We also use an iTouch budget application called iExpenseIt to help us. I am a bit anal about our finances, so it helps us keep track. Just an idea, if you have an iTouch. I agree with keeping things basic and easy to follow.
Jason´s last blog ..Semuc Champey
These are some outstanding methods to set up a budget. I must try the hostel price X 3 method… I tend to find myself buried in numbers and questioning my grand total. Keeping it simple and memorable are the ONLY ways to make it work or me.
Thanks.
That was a useful post, a bit of an eye-opener. I was thinking of something much cheaper.
Beth Partin´s last blog ..Transition Denver Turns 1 Year Old at the Merc
It’s definately important to have a budger. Recently, we just got back from Australia and every though we paid for most of the trip upfront, we underestimated the cost of food – and that was big, given that we were going to a first world country. In any event, it helped that we weren’t shelling out money for hotel and every other cost to make up for the fact that we believed our daily expenses would be much cheaper than they actually really were.
carolina.baker´s last blog ..10 Ways to Save Money, Shopping
Very useful post. It really breaks down the nuts and bolts of long term travel expenses.
Fly Girl´s last blog ..Iranian Radiance
Interesting approach and well written post.
I put so much effort into trying to figure out a budget before my RTW trip, and then I spent about twice as much per day, per country. My budget quickly became meaningless!
The funny thing is even though I tracked my spending like a hawk, mostly so that I could share the data with readers, rare was the day that I was disciplined enough to stick to a specific budget. Instead, I just adopted a certain standard of living while I traveled, and that tended to keep my spending within a general dollar range per country.
Dave´s last blog ..Travel Video – Death Cab For Cutie
Dave,
I think that’s what ends up happening to most of us, the “budget” becomes more a of sense of how much you’ll spend. As you travel, you have an idea of how much things will cost, if you’re overpaying and what it you’d have to sacrifice to go cheaper. I think this budget “method” goes a bit on the high side, but I’ll be curious to see what others think.
I think budgeting is something many travelers have trouble with. The longer the trip or the travels, the harder it gets. I always do a very conservative estimate and like your method. It’s better to be way under budget than way over.
Anil´s last blog ..How I Got Robbed In Guatemala and Other Hard-To-Believe Escapades: Part 6
We’re busy planning our budget for the Mongol Rally next year, so this helped us out a lot.
lauren´s last blog ..Kazbegi Mountain
I think budgets are only useful if you look at them the right way. There’s always unexpected costs for things you hadn’t planned on doing, medical expenses and the likes. You shouldn’t live by your budget. Also the more I travel, the less I actually look at my expenses. It’s more of a gut feeling and from time to time I look at my account balance and have a look how much I spent the last month and how much longer I can now travel with the remaining money. When you just start out, though, you really need a budget, though. Good post!
Boris´s last blog ..A Post From The Editor
This is such a helpful post. Thanks so much! Budgeting hasn’t worked that well for me in the past, mostly because of too many impulsive purchases and unexpected expenses, but now I think I’ve finally gotten the hang of it.
Erica´s last blog ..How to Get Ready For Backpacking
Great post, I wrote an article on this a couple of weeks beforehand which your readers might find equally useful when planning their budgets; Check it out here
Ant´s last blog ..England: Til I Die
I usually take into account about 10€ more than what I think I will spend in the day. This way, I am able to have a “problems” budget.