Everyone enjoys travelling, and if you throw the question “what would you do if you won the lottery?” many people will say “I would quit the job and go travelling” or something along these lines.
Even though the idea of long term travel has got some glamour attached to it, most people will never get beyond the normal yearly two week vacation. First, there is a misconception that you need to be a millionaire to travel for an extended period of time, and second, many people would never leave their jobs and dive into financial uncertainty. In this bad economy you wouldn’t blame them, would you?
Because many friends back home showed curiosity when we announced we were going to travel for 8 months let’s just get something straight: we neither are millionaires, nor did we win any lottery. We just saved money over the last couple of years like many other normal people do (and most importantly we are travelling on budget!). If we hadn’t embarked on this journey, surely enough we would have used our savings to start a mortgage. Many times we considered doing that, but in the end we realized that travelling was (and still is) a top priority for us, and a long time dream.
Those who know me have an idea of my cautious approach to spending money – I have learned this approach and all its related behaviours very early in my life as my parents were very keen on teaching their children the value of money and the importance of saving. Emanuele, on the other hand, has a different, sometimes opposite attitude when it comes to money, but I have to say he is making some good progress on this front 🙂
So, here are the 5 tips on how to save enough for a long term trip – these tips reflect the strategy we adopted in the last couple of years:
1. Understand how much you need and set a goal. Understand that there are three different (broad) type of expenses you will incur if you embark on a long term travel: pre-trip expenses (things like vaccines, travel gear, insurance, flights, visas, etc.), travel expenses (daily spend, transportation, food, hotels, etc.) and post-trip expenses (it’s wise to keep enough for your return, you don’t want to end up in a situation where you need to depend on others to “restart” your life). In relation to pre-trip and post-trip expenses, you will have to make a list of things you need to buy, shop around, and figure out yourself how much money you want to have when you come back. As per travel expenses, many websites have travel budget related information. To start you can check Lonely Planet online and see what is the estimate daily spend for each destination you want to visit. Then you should take this figure and add a 10 or 20% on top of it, for unforeseen expenses, just to be on the safe side. For example, if Lonely Planet says that you can easily live on budget in India with 15$ a day, than you might want to make a budget for, say, 20$ a day. Doing this, and summing up the three types of expenses, will give you a first rough idea of how much you need to save for your trip.
2. Pay your credit card bills and any other loans – Consider this: the interest rate you pay for a loan or a credit card is always higher than the interest rate you get from savings (if you have a savings account) – therefore in a long run perspective it should make more sense to clear all your loans, including credit card balances, before thinking of saving any money. In one word, if you have any spare amount at the end of the month, use it to pay debts first. I opened my saving account in Dublin only once I paid for two loans I had left in Portugal and I avoided using my credit card when I could. When I couldn’t avoid using it, I paid the balance at the next bill instead of accumulating expenses (and interests) month by month.
3. Create an excel sheet and write down every single expense of your day. The morning espresso, the petrol, the supermarket bill – everything. Keep doing it for a few months. This will help you ‘see’ your spending patterns. You’ll realize where you are spending unnecessary money and it will help you to understand where you can cut. Among the actions we’ve taken as a result of keeping track of our expenses, we quit smoking (but of course we didn’t need the spreadsheet to realize it was bad for us to smoke!), bought grocery at cheap supermarkets in our area as opposed to going to the expensive supermarket next door, began to bring lunch at work every day, instead of buying sandwiches, etc. By taking these actions we were able to get to end of the month with more money in our pockets.
4. Open a savings account. Shop around with different banks to get the best interest rate and the best access conditions. If possible don’t use the same bank where you have your regular account and don’t get a debit card for this account. This will put you off, if you feel tempted to use the saved money for the wrong purpose. After checking with almost every bank in Dublin, we opened a saving account each and tried to keep a good amount of money flowing from our regular accounts every month. If there were months we couldn’t reach our objective because we had some higher bills or other necessary expenses to deal with, we were able to easily change our standing orders, just by using our internet banking system. Make sure your bank will allow you to do that too. It will make your life a lot easier.
5. Self-control. Do you really need another pair of shoes? And is it so important to have those branded jeans that cost 4 times more than a normal pair? It’s easy to fall into temptations and buy something we may well do without. It’s easy to make excuses with ourselves but you have to keep your priorities in mind. And if travel is your priority, keep in mind that that’s where you need to spend your money, not fashion or anything else that will get you far from your objective.
Now that we are travelling, we are keeping an eye on our daily expenses (we also have an excel spreadsheet!) to ensure we spend more or less within our limits as set out when we planned our travel budget. But we aren’t getting too paranoid about it. We will still spend a bit more money on a tour, a monument, or a nice hotel if we feel it’s worth. It’s important to keep in mind we might never come back to some of the places we are visiting and so we also need to make the most of our trip.
I hope you found this post useful. I’m sure there are many other brilliant ideas that many of you out there can share. So please tell us about them!