Creating a Long Term Travel Budget

Long-term travel has become a trend through sabbaticals, work exchange and working remotely. Determine the REAL cost using this guide!

One of the biggest questions I’m asked is how I afford to travel. Let me clear the air: I did it the old fashioned way! I worked my ass off in a rewarding industry and prepared for 18 months (read more here: How to Save Money: Dos and Don’ts). You can do the same with a smart travel budget and understanding the the costs of your journey. Let’s begin!

STEP 1: Determine What You Have

First thing’s first: get a lay of the land! You have to understand where you are and what you’ll bring with you. The following questions must be answered honestly and realistically before you go:

  1. Current Savings: What do you have in your bank account? Ignore variable investments and lifestyle funds. I mean, what could you spend tomorrow on a trip around the world?
  2. Incoming Cash Flow: What is your net income from now until you leave? What net income do you expect as you continue traveling?
  3. Return Floor: What are you comfortable coming back to? What funds do you have in reserve, and what size “pillow” do you want to remain intact?

savings_plan

STEP 2: Preliminary Expenses

What people don’t realize is how much money is spent before you step foot on the plane. And while costs fluctuate per person, they do exist and are higher than you might expect.

  1. Gear: Evaluate what type of travel you’re doing and what gear you’ll need with you. Invest in good quality, practical items that’ll last the long haul. You’ll be able to attain them more easily now than on the road (and at more competitive prices online). Read my article: Packing List for RTW Travel: What’s In My Bag

    My cost: I spent nearly $1,500 on gear, electronics NOT included.
  2. Medical: You should be in full health before departing oversees. This includes a full physical, vaccinations and medications for your trip.

    My cost: This will depend on your medical provider, but I paid ~$700 out of pocket for my pre-trip medical expenses.
  3. Identification: Check your expiration dates and renew as needed (passport, driver’s license, etc.). You’ll also want visas for countries requiring them.

    My cost: Over $200 for renewed driver’s license and one visa.
  4. Insurance: One of the most important investments for your trip, (a) travel medical insurance, and (b) property insurance for your electronics and valuables.

    My cost: Almost $500 for one-year coverage of both.
  5. Debt Payments: DO NOT shoot yourself in the foot! You should be debt free before you go (or making carefully considered monthly payments). This includes credit card payments, outstanding invoices, student loans, etc.
  6. Lifestyle Payments: You haven’t left yet; account for payments now through the day you leave (rent, utilities, moving costs, phone bill, etc.).
  7. Contract Fees: These can be expensive, and should not be taken lightly! Evaluate costs of early termination fees, breaking your lease, switching phone providers, annual credit card fees, etc.
  8. Taxes: You’ll either make money or loose money. But either way, they can have a tremendous impact on your balance. Take these into account.

STEP 3: Ongoing Expenses

These are your travel costs; what you’ll spend on the road. The point is to minimize these as much as possible. But be prepared, and save yourself from any surprises.

  1. Reoccurring Monthly Payments: These vary greatly by individual, but here are some to consider:
    a. Phone plan
    b. Student loans
    c. Backup services
    d. Blog hosting (domain, web hosting)
    e. Credit monitoring
    f. Streaming services
    g. Online travel communities
  2. Accommodations: Accommodation costs can easily be the biggest expenditure of your travels. How will you be living? Hotels, hostels, camping, couch surfing…

    My cost: I try to keep accommodations at $10-20/night. This is balanced by expensive stays in big cities and free stays with fellow travelers. It’s a tremendous amount of effort to keep this number low, so any amount of excess is encouraged.
  3. Transportation: I’ll scream it from the hillsides, “public transportation!” Prioritize buses, trains, and subways over planes, car rental, and taxis. My advice? Travel slowly. It’s more rewarding (personally, and financially) to experience cities authentically than check them off a list.
  4. Food & Entertainment: This can be high or low depending on your lifestyle and destination(s). Limit superfluous spending and cook at home. There are too many alternatives to live cheaply here and spend more elsewhere.

food_and_entertainment

Step 4: Monitoring & Pacing

Made it this far? Good! Now for the real challenge: maintaining it. You’ll always spend more than you think you are (I spend almost double), so it’s essential to keep your finances eye-level.

  1. Monitoring Apps: These can be found through banks and 3rd party vendors. I don’t use them myself, but see the value for those who would. Forbe’s recommendations HERE.
  2. Self-Monitoring: This can be as granular as you want it to be. My choice? Big picture balances and pacing trends. I don’t go as far as breaking down category or date (as I find it takes away from the experience). But for some, it’s rewarding and a good way to fully grasp where your money’s headed.

I’ve included the pacing sheet I use to monitor my spending. It’s high-level with a lot of opportunity to expand based on each person’s needs. These formulas give you a rough estimate of how you’re pacing against current goals. Download a copy here: Budgeting_Worksheet.xlsx

budgeting_worksheet


You can read more on the specific vendors I chose here: Checklist for Long-term Travel: The Guide BEFORE You Go

This article isn’t to discourage you from taking the leap. It’s to make you think about that leap strategically and reduce friction getting there. Many people assume all you need is a ticket. And while that’s one way to travel, it’s not one I’d recommend. With a little preparation, you’ll be rewarded with a lifestyle, not just a vacation. And the chances of you extending your stay (comfortably!) are increased with each dollar saved.

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