Budgeting for That Round-the-World Trip (or the extended leave from home)
The biggest excuses people give as to why they don’t travel is that they just don’t have enough time…or cash. If you’ve decided that you want to go R-T-W, you’ve found the time to make it happen. Now it’s just managing the money.
For some people budgeting is a way to get excited about a trip. They use it as the first step in the planning and a way to get themselves psyched up about a destination. Some people are, of course, certifiably insane.
For most of us, budgeting for a trip is like going to the dentist after bingeing on sugar for a few months. But budgeting is better than running out of money halfway through a trip and having to make an embarrassed call home to friends or parents. It only takes a few simple steps to save you a whole trip of stressing about cash flow.
Figure out how much you’ll need
Start your budget with the biggest expenses first – usually this will be your flights, but accommodation also adds up. With a rough idea of how long you’ll be away, you can work out a daily cost based on room rates and meal costs. Add in a little more for activities, museum entry fees, a couple of souvenir t-shirts and the odd concert.
Travel in the developing world is substantially cheaper than the Western world. A week in Hanoi, Vietnam, in a hostel dorm room, with food and drink can run you as little as $140 a week. That’s about $10 a night for the room and about $10 a day for a couple of meals and drinks from street vendors.
An inexpensive room in Melbourne, Australia, plus food can run three times as much. Europe, Canada, South Africa, the U.K., New Zealand – they’re all pricey.
Allow for an occasional splurge. Add a little fat for a Singapore Sling at the Long Bar or skydiving at Lake Taupo. The worst budget is a chain at your leg pulling you away from the best (if slightly more expensive) travel experiences. Sure it can be cheaper to self-cater your way around Europe, but if you’re not trying paella in Barcelona or wagyu in Tokyo then you won’t enjoy the trip.
What to spend before you leave
Add in pre-trip costs including visas, reliable travel insurance and immunisations. Some travellers skimp on travel insurance, but if you can’t afford travel insurance, you can’t afford to travel. Even if nothing goes wrong, it pays for itself in peace of mind and when something does go wrong (lost luggage or cancelled flights) you’ll find it invaluable.
Travel Gear
I don’t like to over-invest in specialised travel gear, but quality luggage and comfy walking shoes always make for an easier trip.
My suggestion is the excellent & versatile Eagle Creek range of sturdy, light and flexible travel gear.
Power adapters, a trusty Swiss Army knife and a torch might also be worth buying, but travelling light is always a good aim.
How to save as much as you need
Once you’ve worked out how much you need, then you’ve got a figure you can save towards. Some people make this number their screensaver or put it on their fridge using this saving goal as motivation to go to work everyday.
This is the “money rolling in” stage. Although it may not feel like it’s rolling in, believe us, when you’ve been on the road for awhile, you’ll look back and think about how rich you were when you were working. The goal of the “money rolling in” stage is to stockpile as much cash as possible. This can start months, if not years, before you leave. Here are some tips for keeping the money in the bank and not in your hand.
- Open a savings account. Consider this account to be your “travel” money – it should be kept separate from your checking account, your nest egg (if you don’t want to spend that on travel) and any other accounts. Do not open another checking account because you will be more tempted to spend that money.
- Have your very own telethon-style countdown as you save towards the goal. If you find saving tough, try budgeting software like Pear Budget (www.pearbudget.com) or Mint (www.mint.com) – the latter includes countdown functions for your savings and can suggest way to cut your expenses. If you don’t hit your saving goal, then it might be time to go back and re-visit the budget for corners you can cut – maybe that Singapore Sling might have to be in a more down-market bar.
- Make a deposit schedule. View your travel fund as something you have to “pay.” For example, every month when you sit down to pay your bills, “pay” 100 dollars – or as much as you can afford to set aside – into your travel account. We recommend dong this right after you receive a paycheck. By forcing yourself to part with your money right away, you won’t spend as much throughout the month.
- Sell your big items, or rent them. If you are going to be gone for an extended period of time, like a year, there is no reason to have your car sitting in the garage (or on the driveway) at your parent’s place. The value of the car will only depreciate while you are away. If you will absolutely require transportation upon your return, set the money aside in another account, so you can purchase a better car when you get back. As far as housing goes, if you have a mortgage, arrange for someone to rent your place. If you’re well enough off that you don’t have to do that, do it anyway. A little extra travelling cash will be worth it.
- Manage your debt. If you have student loans, car payments (not if you get rid of your car!) or a mortgage (not if you find someone to rent your house!), pay ahead on those items for when you will be gone. Start well before you want to leave, especially if you have high payments. It is not easy to make payments from a jungle in South America or the desert in Africa. Besides, your money will dwindle very quickly if you have to make massive payments every month.
- Be realistic in your budget planning.
- Make appropriate estimations based on where you are going. You will not be able to spend the same amount in Australasia as you did in Southeast Asia.
- Be realistic in your expectations of yourself. Are you really going to eat bread and cheese every day? Probably not.
- Include an “extra” amount each week so you can splurge on a more expensive activity. Consider the fact you will meet people along the way that have different budgets. Be prepared to spend more to do things that they want to do, that you wouldn’t have done on your own. Do not let these “extras” catch you by surprise.
- Plan for your expenses while traveling. Figure out how you will pay your bills while you are traveling. Ask for online statements. Arrange for online banking and credit card payments, along with money transfers between accounts. Notify your bank and credit card company that you will traveling overseas for an extended period of time.
How to keep your cash when you’re on the road
Before you go, someone is bound to force one of those ugly, flesh-toned money pouches on you because it ‘saved their life’ back when they did their gap year. Not that there’s anything wrong with money belts or pouches, but you could probably do just as well by having your valuables in an inside pocket of a zipped-up jacket.
Carrying your money in a few forms and in a few different places is always good idea. Diversify your money so you hold a little cash, a credit card and an ATM card. Although there are good ATM locators for Visa, Mastercard and other major credit card providers, you’ll find that they can break down, run out of cash or otherwise fail just when you need to pay that slightly creepy taxi driver. Sometimes cash is still king. I like to carry a ‘whip out’ – a small mount of loose cash to pay for things as you’re walking along. That way your wallet is conveniently stashed and wily pesky pickpockets don’t know where to hit you.
- Stick to your budget. It’s ok if you blow your budget for a day or two, but just because you went overboard, don’t throw the whole plan out the window. Readjust your weekly budget, and stick to it. If you’re horribly off in your estimates, re-evaluate your expenses. Extra money isn’t suddenly going to appear when you run out two months before you’re supposed to go home.
- Keep track of your expenses. You don’t have to write down each candy bar, but keep a rough estimate of what you spend each day. At night, record what you spent on both credit cards and in cash. Keep your credit card receipts so you can compare them with your statements to assure the correct conversion rate. Look at your online statements carefully to assure that you have not been charged for purchases you did not make.
- Pick up odd jobs. If you’re running a little low on dough, ask hostels if they offer beds in exchange for work. Look into WOOFing – farm work that generally does not require a visa. If you have a work visa and will be staying somewhere for awhile, move into an apartment or house. It will be cheaper than a hostel.
- Don’t be afraid to say no. Occasionally, the group of people that you have found yourself hanging out with will want to do something that is outside of your budget – an expensive dinner, a private hostel room, whatever. Don’t be afraid to tell them you can’t participate. There are plenty of other people to hang out with, and lots of things to see in a city. Spending time alone can be very enjoyable – you’ll have a better chance of meeting a local that way!
- Go Local Once you get to your destination you need to take steps to stick to your budget. One way to cut back is to shun imported beers and foodstuffs from home. Sampling food isn’t only a crucial way to experience the local culture; it’s also a guaranteed money saver. Seek out one-off cafes, markets and street stalls for cheap eats and steer clear of Irish pubs abroad - always the priciest place to get drunk!
- Linger longer and keep journeys short Long train and bus rides can really drain your funds so try to stay longer in each town and cut down the journey times where you can. Obviously if you have limited time and a wealth of countries on the wish list, this is tricky, but consider exploring two or three countries in depth rather than flying through a dozen or more; your wallet will thank you for it!
- Shop around or go it alone Guided tours might cut out some stress, but they are always going to be more costly than independent travel. If you do join a guided tour, shop around and don’t be afraid to barter, they’ll often be willing to lower their prices. You’ll always pay over the odds if you join an organised tour though, so look into going it alone. Check out tour company itineraries so that you know what excursions are on offer, then look into public transport options - you’ll probably knock 50% of the fee if you opt out of a guided tour. And if you do join a tour, never book it from your home country. You’ll save a fortune booking locally.
- Stay outside of the city. Cities are expensive. If good transportation is available, consider staying outside of a city, and venturing in for day trips. This will allow you more opportunity to eat at local restaurants, shop at local stores and immerse yourself in the “real” culture, all while saving yourself a few bucks. Check out Global Freeloaders (www.globalfreeloaders.com) or the Hospitality Club (www.hospitalityclub.org) for free places to stay.
- Take a limited amount of money when you go out. Many backpackers fall into the trap of spending a lot of money on alcohol when they go out to the bars. Once they start drinking, they stop caring about a budget or how expensive another round of beers is. Limit the amount of damage you can do by only taking out, say, €20, or whatever you feel is reasonable. When you’ve spent that €20, you’re done, end of story. Make sure you include enough money for a cab.
- Remember what goes around comes around. Don’t fret about the extra €2 that you paid for a tip because someone didn’t throw in enough cash at dinner. If you do, you’ll end up stressed and irritated with your new travel friends and it will put a damper on your experiences. Chances are, the next night you’ll split a half bottle of wine with someone you just met and not have to pay anything.
