How to Budget for a Trip Around the World

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Planning a Round-the-World Trip: How to Budget

This is Part Three in a Series dedicated to travel tips and lessons learned while planning for an extended Round-the-World (RTW) Adventure.

Aside from our favourite countries, a popular question we often get asked by our readers is, “How do you budget for long-term travel”?

Budgeting is one of the most important things to consider when planning a long term adventure, especially when it includes multiple countries. Prior to departing on our RTW adventure, we spent several months saving, researching and planning. Our trip would take us to over 35 countries on 6 continents, so we needed to be vigilant and stay on top of our finances.

Don’t Make This Common Mistake.

While on the road, we talked to several travelers who had to change their itinerary completely or cut their trip short because they ran out of money too quickly. Obviously this is a mistake you want to avoid.

The common theme amongst these travelers was that they didn’t account for the differences in prices between countries. Most of them appeared to use a simple formula – budget X dollars per day, regardless of the location or what you plan to do at the destination.

Simply budgeting $50 or $100 per day is not going to cut it. The problem is that most people group regions together without considering the differences in prices amongst neighbouring countries/destinations.

For example, food costs in Peru are much cheaper than Argentina, so this will obviously hurt your bank account if you based your entire South America budget on Peru’s prices ($50 per day works in Cusco, it doesn’t work in Buenos Aires).

Similarly, the cost of hotels in Rome are more expensive than the Croatian countryside, so budgeting $50 per night for your accommodations throughout Europe is not a healthy way to budget. 

7 Simple Tips to Build a Better Travel Budget

The purpose of this post is not to tell you how much it costs to travel around the world (there are far too many variables that impact this number), but rather to share 7 simple tips to help you build a smarter travel budget.

1 – Put together a loose itinerary

When we booked our around-the-world flights we had to commit to the hub cities that we would arrive and depart from. This was a good thing, because it forced us to create a general itinerary.

Keep in mind, this doesn’t mean that your itinerary has to be carved in stone. Our plans constantly changed and evolved, but we were able to budget more effectively by knowing exactly what countries we would visit. If you have a set amount of time you will be traveling then take the time to map out how many days you want to spend in each place – you’ll be amazed at how quickly your months fill up!

2 – Create a travel budget spreadsheet

The success of our RTW travel budget can easily be credited to our trusty spreadsheet (we returned home 11% UNDER budget). Remember, spreadsheets are a budget’s best friend.

Here’s what we recommend. For every country you plan to visit, you should create a separate section (call it a budget within the budget). Breakdown the typical expenses you expect, such as accommodations, food & beverages, transportation, excursions, shopping, misc, etc.

After doing some basic research on the destination, determine a value for each item and multiply by the number of days you plan to be there.

Using the Buenos Aires example (see the image), we assumed $30 per day for food and beverages, which totaled $240 for the 8 days we intended to stay in Buenos Aires.

The critical piece to this step is to consider what you plan to do during your visit. For example, if you plan to go snowboarding in the French Alps, have you accounted for lift passes and equipment rentals? If you are going to the Belize Barrier Reef, have you budgeted for scuba diving excursions and boat transportation between islands?

Repeat this exercise for every country you visit, similar to the image below. Once completed, add up each box and determine what your total budget should be for your trip around the world. If this number is much higher than you have in your bank account, it’s time to make some adjustments.

3 – Open a separate bank account specifically for your trip

By having a separate travel bank account that was not connected to our bank cards, we limited the amount of money that could be lost or extorted if we ran into trouble (read our story about getting robbed in Bangkok).

More importantly, it gave us a clear picture of how much money we had remaining at any given point. We used the balance of this bank account as the “top line” of our budget, which easily showed us if we were ahead or behind on our budget.

4 – Start saving and pay yourself first

Unless going into debt is your plan, you will need to start saving your pennies. There are hundreds of ways you can reduce your spending in order to increase your savings, pack your own lunch to work or bring a travel mug of coffee to work, but our greatest savings tip is to pay your travel account first.

If you need to put aside $1,000 per month then do that first, before you pay your other bills. By doing so, you will quickly learn how much money you are spending on unnecessary things like eating at restaurants or partying at the bar. It’s amazing how little you really need to survive, and it will be good practice for when you are on the road and managing a tight budget.

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5 – Update your budget as you travel

To be an accurate tool, you must continually update your spreadsheet as you travel. After each segment has been completed, update the budget by eliminating the box and adjusting the remaining funds in your travel account.

Let’s look at our Japan trip as an example. Using the spreadsheet above, we can easily predict the costs of that segment. Let’s assume the budget for our two weeks in Japan is $2,000. Using online banking, we transfer the $2,000 from our travel bank account to the individual bank accounts that are attached to our bank cards and/or credit cards. Then, we withdrawal our weekly expenses using our bank cards and/or credit cards.

Every two weeks, we take the balance of the travel account and input this number into the spreadsheet. This lets us know if we are ahead or behind on our budget, allowing us to react accordingly.

If you fall behind on your budget, you can reduce spending or make sacrifices until you get back on track. This forces you to make tough decisions – you can’t do everything!

6 – Account for everything

Long-term travel comes with several upfront expenses that must be included in your travel budget. Do you need to purchase international travel insurance, vaccinations or extra medication? Will you be purchasing a new backpack, hiking boots or digital camera? Will you be using an around the world plane ticket or will you purchase individual flights as you go?

All of these items should be accounted for in your budget.

Do you have monthly expenses that need to be paid while you are away? For example, we rented our condo to tenants for the year, but the rent did not cover all of our home costs. We needed to pay an additional $250 per month to cover these expenses.

Finally, don’t forget about your return home. Because we quit our jobs to travel around the world, we needed to return home with some money in the bank. Will you need to come up with a security deposit for an apartment rental? Will you need to pay for insurance to get your vehicle back on the road? Visualize your return and budget accordingly.

7 – Don’t forget about currency exchange rates!

During our RTW trip, we lost a lot of money on currency changes. The Canadian dollar was strong when we were saving for our trip in 2008, but a month before our departure it dropped dramatically (when compared to the US dollar). We lost about $0.20 on the dollar, which equated to about $10,000!!

If your currency is weak, we recommend that you benchmark your budget against the US dollar. Currency fluctuations might also dictate your travel itinerary both positively and negatively, so be flexible and have a Plan B in your back-pocket.

Here are a few more RTW travel tips.

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Here are a few popular posts from our RTW Adventure:

Do you have travel advice or recommendations for soon to be world travellers?
Share your feedback and experiences in the comments section below!

 

About Traveling Canucks

Cam and Nicole Wears are newbie parents living in beautiful Vancouver, British Columbia. A passion for travel and outdoor adventure has taken them to over 65 countries on 6 continents in the past 10 years. Learn more about their story here. Follow them on Google+ and subscribe to their travel newsletter.