How to use a Travel Budget on the Road

The point of all the planning and budgeting is to make life on the road easier, safer and less stressful. This article covers how you should maintain your budget on the road and stay informed about your financial situation.

You have a lot of options when deciding how to manage your finances while traveling. Given time and experience, you'll figure out what works for you. We’ve refined our processes a few times over the years to emphasize simplicity and convenience. The best plan is the one that you can stick to.

Keeping Track of Expenses

There’s no need to be detailed with your record keeping on the road. You only need to know how much money you’re spending, and how much you have left. The easiest way to accomplish this is to coordinate cash withdraws with your daily expenses.

For example:

1. You figure your daily expenses are $20. $140 a week.
2. Every week, withdraw that amount from an ATM.
3. Spend this money until it’s gone.
4. If you don’t spend it all, carry it over into the next one or two week period.
5. If you run out, withdraw less the next time and try to stretch your money.
6. If you continue to be off, revise your budget.

Dividing your spending money into one or two week sections makes it simple to keep track of. You don’t have to worry about the big picture every day, just the cash in your pocket. You also don’t need to worry about what you’re spending that money on, it just needs to last as long as you planned.

Revisiting Your Budget

The goal is to get an idea of the big picture every now and then so that you can make changes to your daily spending habits if necessary. If you’ve done a decent job of keeping track of your day-to-day expenses this will be simple and shouldn’t lead to any surprises.

We tend to do this once or twice a month on long trips. If you’re like us and rely on debit/credit cards for access to your bank account, you won’t have a clear picture of exactly what you’re spending until you look at your bank statement. Luckily, online banking makes this very easy.

To further simplify the task of staying on budget, make a list of how much money you expect have in your bank account at the end of each week or month of your trip. When you check your account balance online, it’s just a simple matter of comparing the two numbers to see if you’re still on target.

Currency Exchange

The hardest part with managing your cash is dealing with exchange rates. You’ve calculated your spending money in your home currency. Converting that to the currency of the country you’re in won’t give you nice even numbers.

Convert your withdraw amount to local currency and round down to the closest amount you can get from the machine. Online resources are the best for finding out exchange rates initially, but continue to verify while traveling. Also be aware that your bank will charge you a small percentage for withdrawing foreign currency. You won’t know for sure what it costs you to withdraw money until you see your bank statement so it’s best to have a good idea first to avoid surprises later.

Avoid changing cash if possible. If you’re traveling across borders, do your best to plan accordingly. Spend everything you have if you know it won’t be accepted at favorable rates in the next country. Money changers at the border will rip you off, more so than your bank. If you’re stuck and need cash, change enough to get you to the next ATM.

See our article Handling Credit Cards, Cash and Bank Accounts while Traveling Internationally for more information.

Separating Expenses

It helps to divide your expenses into two categories: daily expenses and one-time expenses. Daily expenses cover your food, lodging and pocket money. One-time expenses cover large costs like tours, admission fees and plane tickets.

It is simplest and safest to divide these two sums into two separate bank accounts. Daily expenses are drawn regularly from one account that is monitored frequently. Big expenses are paid out of a second account. The second account also acts as an emergency fund.

Having a dedicated account for daily expenses makes it easier to keep tabs on your balance. It’s also helpful when making decisions about big one-time expenses. When the second account starts to run down, stop spending money on tours for a while. And if you save on daily expenses, transfer those savings to the second account for something fun.

Spend your Money Smartly

You work hard to earn and save the money finances your trip. No sense in giving it away for free. The easiest way to be successful at sticking to your financial plan is to keep your money in your pocket.

Unfortunately in many countries there is an entire industry that grows around the fringes of tourism. If you are easily identified as being an outsider (and you will be) be prepare to deal with these encounters. At many popular destinations they are unavoidable.

You will be approached and offered a wide variety of goods and services. Money changers at border crossings, souvenir hawking locals, overzealous taxi drivers, shoe shines. In some places it never ends. Remember that your pocket money may be enough to feed and house a local for weeks.

Encounters like this don’t usually involve criminal activity. These guys are just trying to make a living at your expense, with incredible persistence and a smile on their face. Regardless of their intentions, you would do well to keep a tight hand on your purse strings and always watch your belongings. Tourist areas also attract more seedy individuals.