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.
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.
Here are a few popular posts from our RTW Adventure:
- Pictures of Machu Picchu, the Lost Incan City in Peru
- The Mysterious Moai of Easter Island
- The Legendary Temples of Angkor in Cambodia
- From Backpackers to Bollywood Actors: An Interesting Day in Mumbai
- 17 Weird & Interesting Photos from Japan
Share your feedback and experiences in the comments section below!
Great set of tips! People definitely underestimate the amount of money required, as well as the amount of planning involved for ‘Around The World’ Trips. I admire you dedication & energy 🙂 I get tired after just a few weeks of traveling. lol
Thanks Jenny, glad you found the tips helpful.
The hardest thing for us is to go back in time to when we were planning for our trip, and remembering the things that we needed help with.
Great list. It’s all too easy to forget about currency exchange losses & fluctuations. Also I’ve learned to be stingier in expensive countries and more luxuries in cheaper ones. You get more bang for your buck!
Yes – the currency rates were definitely not planned for. Of course it’s hard to predict the future, but the biggest lesson learned was that Canadian dollars are not the world’s currency – we now load up on US currency. 🙂
Great idea color coding the different country budgets. We have ours laid out in a traditional table on excel, but boxed up colors are funner to look at. 🙂
Haha… yes, the colours do help keep things nice and organized.
If you like that, you’d love our colourful timeline chart… 🙂
love the comprehensive budgeting. this is how I budget for all my trips [short term, not long term trips]. I usually pad my budget just so that I can account for any unexpected things.
Great point – we also try to pad our budget whenever we can.
As the saying goes, “Better to be safe than sorry”!
Great tips – the planning geek in me is fully loving those multi-coloured spreadsheets! I’ll bookmark this, it’ll come in handy for planning. Thanks for sharing!
Excellent – A fellow planning geek!
Your post is so very timely, as I’m about to embark on my own RTW.
The currency conversion is a great point, and while I’ve traveled a lot for work in the past and because I’ve lived in South America for a few years, I’m constantly following world currencies. In particular, I’ve been using the Currency Converter widget on my (Mac) Dashboard, and it’s also available on the iPhone/iPodTouch.
Thanks again for your post!
Exciting times ahead! Glad you found some value in this post!
This is one of the most helpful posts I’ve ever read! I really, really hope to do my own RTW trip someday so will definitely take your advice guys. I love the spreadsheet idea (and am going to make one up of my own.) Thanks for sharing.
p.s. That “miniature” effect you use on your photos is really cool!
Thanks Michael! Glad you like the photos 🙂
Great post with lot of information! At any website you can get the spots that you must visit while on a world tour. But your blog stands out as it shows the details of how to maintain the budget. I like the way you have classified based on colors. I look forward to follow your tips within sometime!
Thanks for your comment Steve. We are glad you’ve found some value in this post 🙂
Amazing Tips! I started planning for a world tour but never paid much attention to start savings. I think I need to implement your idea and start savings now! Savings is very important if you want to enjoy the world trip to the most.
Yea, it’s definitely important to have money before leaving on an extended trip
When it comes to travel, there is one advice that I would like to give to all. Always plan and keep your budget plan also ready. Without these things, you cannot enjoy the trip. Thanks for your wonderful tips!
Thanks for your feedback John
Very practical! We’re traveling quite differently, as we work almost full-time from the road, so we didn’t really have to budget before we started traveling. We keep track of all our expenses, though, (even ten cents spent on a phone call) so we know exactly what we’re spending each month. Travel expenses can spiral out of hand really quickly!
Definitely a different game when you are earning money as you travel. Though its still important to manage your financial expectations for each segment of your trip so that you don’t run out of money too quickly.
Appreciate the feedback Christy!
What a terribly useful post. Thank you!
No plans for any long term travel at the moment, but I will share this with our online communities.
And thank you for the valuable advice.
At first I read “what a terrible post” and I was ready to starting boxing! 😉
Glad you found value in the post Emme!
Great, helpful post, guys!
Kind of along the lines of your “Account for everything” tip, I would also add in something about expecting and budgeting for things to go wrong. Inevitably, something WILL go wrong! So you may as well be prepared for it!
Well said Amanda, we agree that it is always best to plan for the things that WILL go wrong (because they will!) 😉
X-cellent post. Especially the spreadsheets. This one has been “saved to file”. Thanks!
Thanks Jules! Glad your found some value with the post 😉
Fantastic and comprehensive tip advice and trips. Thank you! Definitely sharing this with a few friends.
Again, I’m loving your tiny shots. You’re really doing a fantastic job continuing to take excellent shots and make them last in an area of photography that got over saturated fairly quickly. Nice work!
Thanks for the kind words Alex!
I couldn’t agree with you more about prices differing from region or from one country to another. It’s great to have a budget in mind but I think it’s important to have money set aside for when expectations aren’t congruent with reality.
Thanks for the feedback Sam!
Certainly its always ideal to have money set aside, but it’s just as important to measure your spending so that you don’t have to resort to cleaning out the savings.
Great advice, I hadn’t thought of the Currency Exchange being diff. in each country, that could eat a hole in your pocket!
Although I am still in the research stage of my plan, I wanted to mention one thing that I will include in my budget. The first leg of my Journey will be from the U.S to Panama via Private transportation (Jeep). As this is my personal vehicle, I had to factor in Mechanical Repairs and Gasoline for each country. If I were to incur a major breakdown in Nicaragua, how long would I have to wait for a part, the labor cost, and the additional time for accommodations & food? That could really bite you in the A..! You really have to open your mind and go over your plan a few times before leaving. A good source for the issue I commented on, are ex-pats. Many have websites and can give invaluable info. on what to expect.
Great feedback Kevin!
Researching expat websites is a very good idea for anyone in the planning stages of a trip, especially if you plan to move around the country or region.
This is extremely helpful! My biggest takeaway here is the separating of accounts from bank cards, etc. I had been struggling to figure out how best to protect ourselves and this makes perfect sense! Thank you! Gracias! Merci!
We found this system to work very well. We were nervous about having all of our cash tied to an account that has our bank cards, in the event we got robbed or lost our belongings.
By only transferring the amount that was needed for each trip segment, we didn’t worry about our account being compromised (and it helped us understand our cash flow position).
Great tips! I LOVE budget spreadsheets! I am the budget spreadsheet guru designing numerous ones for household budgets, travel budgets, and taxes!
Still loving these miniature photos! 🙂
Awesome – a fellow budget spreadsheet nerd!
I find it so important to actually write down our goals and expectations. It makes all the difference and gives me a reference point to determine if I’m winning or losing at any given time.
Great tips! I was thinking of writing a similar article but I think you have out done me here!
Thanks Jade!
Love these travel trips. Now, time to book the travel part!
Thanks Marly! Where is your next big adventure going to be?
Great advice. I met so many people while travelling who had to go home early because they ran out of money. I think it’s a really good idea to pay for the major expenses at the beginning of your trip such as flights with flexible dates and activities that can be done within a month. This means you know how much you have left and makes it easier to budget. Love these photos too!
Thanks for the tips Monica! 🙂
Hey the ‘three’ of you – good post.
Agree, when getting ready for your travel open a separate account. I did the same for my little Spain trip – first the rent, then for the trip and 20£ ‘play’ money for the week – if not spent, it would be used for the next week.
Very handy to know when travelling are the partner banks of the one you have your credit card from. You pay less commission when doing withdrawals. When every penny matters, it makes a difference. 🙂
Happy travelling and exploring.
Hi Nadine – thanks for your feedback!
Nice tips! I believe budgeting is the #1 thing to prepare for any trip (unlike some of my friends who concern about their safety more than anything. They watched too many Hostel-kind-of-movies I guess,haha). I totally can relate to the exchange rate problem. Now I completely lose track of how much money I have lost only because of it.
Yes – the exchange rate can be a budget killer!
On the other hand, if you’re flexible, it can be a fun opportunity to change the itinerary and visit countries with a weaker currency.
Great advice! now my feet is itching!
having a separate bank account will really help me do this, though i’m not planning to travel around the world (yet). Now I have to start planning!
Thanks!
All great adventures start somewhere! Keep saving a little bit each pay period and you’ll reach your goal!
You brought up a great point about forgetting to factor in the price differences between countries. Ive never been gone longer than 10 weeks but if I were planning a longer trip I think this is something that can make or break a trip.
It certainly can have a big impact if you don’t plan for it. Going from Bolivia to Argentina will be a big shock to the budget
Thanks for these great tips. We are going to start forming our budget but the problem is our plans our too loosely defined right now. But I like your express word sheet set up I think I may copy that.
Keep a diary of your expenditure as you travel. This will help keep you in check and on budget as you go.
Agreed – any method for tracking your expenses is a solid idea.
Extremely thorough and useful post. We are in the planning/saving/waiting phase of a world trip, with just over a year before our intended departure date. While we are overwhelmed by the tasks involved in this phase (and anxious to just leave already!), we are trying our best to find the right balance between overplanning and leaving too much unplanned.
Thanks for the great post!
Peace,
The Wandering Soles (your fellow Canadian trvael bloggers)
Thanks for your comment – we’re happy you found some value in this post. Feel free to contact us if you have any questions or concerns.
Cheers!
Cam and Nicole
Why cant I download the around the world spreadsheet as an Excel file so I can scroll and play with it??
We don’t have the spreadsheet attached. It’s a personal budget, so it’s not something we have made available on the website.
is taking a big long cruise a good idea?
I’ve been tempted for a while because i’ve seen some wonderful world cruises and they just seem like a great way to try and see some/most of the world.
Is it a good idea or not, i have no idea how much traveling would actually cost.
Hi George – it really depends on your travel style and budget. Cruises offer a lot of advantages and convenience, but they are limited on cultural experiences. I’ve found that some of my most memorable travel experiences were the ones I didn’t plan – so I’m not sure a cruise will give the adventure, but it’s safe, predictable and comfortable.
Yea it depends on the travel style and budget 🙂
Nice informative post!!! now a days some companies are giving awesome casback on hotels and flights booking, hotels deals etc.
Really inspiring!
how did you get funds to travel around the world? share your tips please!
I opened a separate account just for my travel savings and I never touch that account! It helps a lot!