Travel budgeting is fun, right? Unless you actually enjoy sifting through receipts, or researching the per diem costs of a third world country you’ve never been to, you’re probably not looking forward to any of this. We’re not going to lie, it is very tedious work, and it’s rarely something we’d consider fun -- but it is absolutely worth it. And who knows, maybe in some perverse way you’ll start to enjoy it, or at least get more excited about your upcoming adventure in the process.
Creating a travel budget before your trip starts is all about getting the most out of your travels while you’re on the road. We put in a lot of effort before we leave in order to avoid hassles while traveling and keep our peace of mind.
These are the activities covered in this article:
- Understanding your current financial situation
- Calculating start up expenses
- Calculating reoccurring expenses
- Calculating big travel expenses
- Calculating daily expenses
- Calculating savings & income
- Doing the math
- Setting goals
Check out our sample travel budget to see a practical example of what is described here. That article includes a sample spreadsheet you can download to help get you started and make sense of how we organize our travel budget.
Feel free to skip around. This is not meant to be a step-by-step guide. A lot of this information takes a long time to collect. We refine our expense calculations over months of doing destination research. This isn’t something you should try to knock out in one weekend.
Understand Your Current Financial Situation
You have to start somewhere. Travel budgeting is pointless if you don’t know how much money you have and can save before the trip starts. You’ll need to know the following numbers for your budget to come to a meaningful result.
- do you have in savings?
- do you want to keep in savings for your return home?
- can you add to your savings before you leave?
We’ve written a few articles about pre-trip financial matters that may help with:
Calculate Start Up Expenses
Start up expenses include all items that require you to spend money before you leave home, including: plane tickets, new gear, visas, etc. Here’s a list of our most recent trips to give you an idea of how much start up costs can be relative to the entire cost of a trip.
- Australia - five weeks with a rental car. Start up expenses were 25% of the total, almost entirely plane tickets.
- Africa - four months with our own vehicle. Start up was 50% of total expenses, or 30% excluding vehicle purchase & outfitting.
- Southeast Asia - five weeks backpacking. Start up was over two thirds of the cost. Plane tickets were more than half of the total spent on the trip.
Consider the costs of postponing (or ending) your existing lifestyle in order to pursue a life on the road. The cost of getting out the door can be deceiving. Expenses like breaking a lease or cell phone contract, moving stuff into storage or paying someone to watch your house/car/pets can add up quickly.
Gear is another big part of start up costs. You may need a new pack, guide books, camera equipment, clothing, gadgets for your mobile office, or even a new vehicle. Don’t go overboard with buying stuff for your trip. Spend time thinking about what you’ll need. It’s best to say no if you have doubts about a new piece of gear, especially if it’s possible to buy on the road. Refer to the articles in the Packing Advice section for more information on how to choose gear that fits how you travel.
Odds are you’ll need to pay for paperwork to be allowed to enter foreign countries. This can include: a passport, visas, carnets, immunizations, flight tickets and special insurance. These costs vary greatly depending on your nationality and where you’re headed. Do your research and get started well before your departure.
Calculate Reoccurring Expenses
Reoccurring expenses include any bills you’ll need to pay over time while you travel. For example:
- Insurance - travel/medical, vehicle, equipment coverage
- Mortgage payments
- Car loan and insurance while you’re gone
- Cell phone plan
- Medical expenses
- Student loans
- Credit card debt
- Storage rental
- Savings/retirement/investment funds
We minimize these expenses as much as possible. Paying for things you won’t get to enjoy while you’re traveling (like a car) is not much fun. And loans that continue to accrue interest while you travel will only make life more difficult.
Depending on the how long you’re traveling it may be smart to get rid of some of your stuff. Avoid paying for extra storage space by loaning your belongings to friends and family. Try finding someone to rent your house, take over your lease or maintain your car while you’re gone.
If you have a savings plan, such as a retirement or investment funds you should continue to make deposits during your travels. There’s no reason to stop saving for the future, you probably won’t be traveling forever.
Calculate Big Travel Expenses
Big travel expenses can include:
- Attraction fees
- Park entrance fees
- Guided tours
- Local flight tickets
- Rail passes
Make this list as you do destination research. Special tours and park fees usually make up the majority of this category for us. For example, we spent $1500 per person climbing Mt. Kilimanjaro while in Africa over six days. Thirty times more than our normal daily expenses, a huge difference that we had to account for.
As you research your destination and discover activities you’d like to do, add them to the list. Prioritize the list once you’re satisfied and use this area of your budget to give you more flexibility. Make sure your most important expenses are covered in your budget. Then if you save more money or travel cheaper, go for extras. If you’re over budget, consider cutting excursions or guided tour to make up for it.
You can find prices for transportation, tours and attractions online. For big ticket items get multiple price quotes, especially when you have a lot of options. Recently published guide books are usually accurate when it comes to estimating entrance fees, guided tours and excursions.
Calculate Daily Expenses
Daily expenses cover:
- Food and drink
- Local transportation
- Spending money
Online resources are the source for estimating daily expenses. Recently published Lonely Planet guides are usually accurate with costs, as is their website. Be warned that once a place is recognized in a popular travel guide, prices will go up. It’s best to find two or three sources for the same information and take the average or maximum. Keep in mind that prices can be horribly wrong in outdated published material, whether online or printed.
We suggest you calculate daily expenses per destination. Most travel resources will give per diems by country. Not a problem if you plan on traveling through a country, but it is if you plan to spend a lot of time in one place. There is a big difference between rural and urban areas, especially in more developed countries.
Travel guides can be useful for finding daily expenses specific to a region within a country. They allow you to quickly compare the cost of staying in cities versus surrounding areas. For long-term lodging prices your best bet is the web, or even better, people on location.
Multiplying accommodation cost by three will give you a quick and dirty estimate of your total daily expenses. This works well for budget travel, but not in all cases. It is safe to assume that in areas with higher lodging costs you will spend more for food, transportation and other daily necessities.
Adding a “spending money” item to your budget will give you extra flexibility. We figure 50% of our total daily expenses, or 100% of our accommodation costs, whichever is less. Usually $15-20 per person per day. Think of it as a rainy day fund. We use this money to make up for budget shortages, or for extras like a night out on the town or a cushy hotel room after a rough bus ride. It’s not money you have to spend, but it will let you to enjoy unexpected experiences or a few comforts while traveling.
Calculate Savings & Income
Recording your savings and income is the last step of creating your budget. Use these numbers to:
- Check that our travel plans are realistic.
- Set the start date of your trip.
- Decide how long your trip can last.
- Set goals for saving money before leaving home.
Be careful when projecting income that you plan on making on the road. Unless you’re an experienced digital nomad, or have some contractual assurance of your earnings, you may end up making less than you think. Plan to make less and revise your budget once you have gained experience earning money while traveling.
It’s important to keep some of your savings in the bank in case of emergency or to fund your eventual return to civilization. See our article on planning for emergencies for more information.
Do the Math & Set Goals
Totaling all of your calculated expenses can be tricky. This is where spreadsheet software comes in handy. Being able to change numbers and immediately see how it affects the bottom line makes it easier to balance your budget and set goals. See our sample travel budget article for an example and further explanation, or download the Excel spreadsheet directly.
Start adding up numbers once you’ve made a good start. We find it easiest to break up the math into these categories:
- Savings = what you have + what you’ll save - what you want to keep
- Income = expected monthly income * number of months you’re traveling
- Start up cost total
- Reoccurring costs = monthly total * number of months you’re traveling
- One-time travel costs total
- Daily expenses total
- Total Trip Cost = start up costs + reoccurring costs + one-time costs + daily expenses
- The Bottom Line = savings + income - total trip cost
If the bottom line is negative, you have work to do. Some options are:
- Reduce one-time expenses, they are the easiest to get rid of.
- Save more. Set a goal and stick to it!
- Find cheaper travel options.
- Figure out how to make more money on the road.
- Shorten your trip.
- Sell stuff you don’t need.
Set smart goals. If it’s not realistic and you’re not serious about it, there’s no point. Be as specific as possible. Set dollar amounts so you can gauge your progress.
Reward yourself by spending money on start up costs, especially new gear. For example, once you’ve saved $2000 buy yourself that new camera. Incentives can do wonders for motivation.