How to create a travel budget & stick to it
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Summer vacations, gap years in Europe, a winter getaway to a tropical island, a Christmas holiday on the slopes in Aspen: Travel is enriching and rewarding. But it’s rarely cheap.
From the cost of transportation to accommodations and meals, there’s a long list of expenses associated with globe-trotting even for the most frugal couch surfers.
Creating a travel budget can lay the groundwork for a stress-free trip, preventing you from running out of money halfway through the journey or returning home with credit card debt you can’t afford. Here are six steps to get you started and help you stick to a travel budget.
With the endless amount of information available on the internet there’s hardly an excuse for not drafting an outline of what your planned getaway might cost.
“Figure out the average cost of accommodations, a restaurant meal, public transportation tickets, a taxi ride and entry into attractions. Almost all of that information is available online and it should give you a general idea of how much things cost,” said Maggie Turansky, co-founder of travel website The World Was Here First.
When budgeting, don’t forget to include small items that add up quickly, such as airport parking, and tips. Outlining these expenses can be made easier using a spreadsheet or budgeting software.
We all have something we love most about travel and are not willing to give up, whether it’s first-class airfare or a personal guide each day.
For Cathy Bennett Kopf, who manages a $6 million budget as a municipal finance officer by day and owns the travel site The Open Suitcase, the number one travel budget rule is dedicating the majority of your funds to the non-negotiable item.
“That item will be different for everyone. Some people love to stay in high-end hotels … Others want to spend their vacation dollars on big dinners,” said Kopf. “There’s no right or wrong way to allocate your vacation budget. Just know yourself and don’t compromise on what’s important to you.”
Unexpected expenses are common when globe-trotting and best dealt with by creating an emergency fund specifically for your trip, said Simon Hansen, founder of Family Travel Planet. Set aside 30% to 50% of your total trip cost in such a fund.
But keep in mind that it’s not necessarily a good idea to carry your emergency cash with you, said Hansen. Instead, split the money up, putting half in a bank account that can be accessed wherever you travel and keep half in your wallet.
“Having half of it in the bank minimizes the chances of you using the emergency fund for other travel purposes and keeping half readily available makes you prepared to pay for in-the-moment transactions,” said Hansen.
Once your travel budget is outlined, consider creating a savings account earmarked just for travel funds. This can help ensure you don’t spend the money needed for your trip on other expenses.
“This creates separation between your everyday money in your checking account and your travel-marked money in your savings account,” said financial adviser Jake Northrup, a certified financial planner with Experience Your Wealth. Northrup recommends taking the extra step of automating deposits to this account.
Yet another way to help cover yourself financially during travel is by purchasing travel insurance. Such policies can help cover out-of-pocket costs related to lost luggage, emergency medical incidents, canceled flights and more.
“Though some people may frown at this idea, prevention is better than cure. Besides, travel insurance only ranges from 4% to 10% of your prepaid trip costs,” said Hansen.
There are many tempting ways to spend money while exploring the world, from booking experiences to purchasing souvenirs and indulging in the pleasures of local cuisine.
One way to stay on top of spending during your journey is by tracking daily expenditures, which can be done using a travel budgeting app, said Matt Kiefer, founder of Hostelgeeks.
“There are a lot of cool and free apps for doing this. I use Trail Wallet and since 2017 I track every single dollar going out of my pocket,” said Kiefer. “You can set up your own categories like entertainment, transport, food. Then you can set up subcategories. For food, for instance, I have street food, supermarket, restaurants.”
Want to get started? Use our vacation budget spreadsheet.
Image: GraphicaArtis (Getty)
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