Travel Budget Overview

“Travel is the only thing you buy that makes you richer.”

-Anonymous

If there is one topic that many people dread as part of the vacation planning process, it is likely having to do the travel budget (if they even put a budget together at all). Not only can it be stressful seeing all your hard-earned dollars going out the door as you book reservations, but most people don’t see the value of spending time to set an actual budget and shop around to get the best possible deals, or even know where to start.

Thus, it is probably true that we are outliers in the sense that we both actually enjoy the process of setting budgets, monitoring actual expenditures, and finding creative ways to save money. So over the next year of travel that we will open up our travel finances to all of our blog followers.

The hope is that through our travels (and probably a few mistakes along the way), we can share some unique ways to save money while traveling. We also hope to dispel some of the false perceptions that traveling has to be an extravagant, blow-all-your-life-savings type experience in order for it to be enjoyable*.

We will be doing a monthly financial blog post to provide updates of how we are tracking against our budget while abroad each month, including some key takeaways and lessons learned. Below, we provide an overview of the target annual budget, how we set it to begin with, and where we plan to spend our money.

2018-2019 Travel Budget Overview

As a good start to any budgeting practice, there were two questions that we posed to help set the initial scope of our planning before breaking it further down:

1. How much annually do we spend on our current lifestyle?
2. What is our overall estimate of what we plan to spend over the next year (i.e. what can we afford)?

The first question is something that everyone should really have a good grip on in your own personal finances. After all, if you don’t know how much you spend each month as well as where that money is going, it’s hard to manage and control those expenses and figure out ways to optimize and save.

For the second question and for setting the high-level target, we chose a number of $31,000 per person (per year). This number came somewhat from a bottoms-up analysis of what we spent monthly in the past, adjusted for what we think we can do while traveling over the next year. This number also aligned with the current savings and passive income targets for both of us, such that we’d be sure we won’t be putting an irreparable dent in to our savings as we go on our voyage.

$31,000 may seem like quite a lot. But let’s consider for a minute what the “typical” American vacation costs. Let’s just assume one week to somewhere nice for a couple: round-trip flights are probably on the order of $300 each, if within the continental US. Throw in a semi-decent hotel at $150 a night, and then eating out lunches at a reasonable $10/each and dinners at $20/each (and with any alcohol, I’m sure you’re spending more), with $20 each in entertainment each day for touring, show tickets, etc., and you’re already at $2,350 per week (~$1,200 each). A good vacation, right? I’m sure that’s still on the low end of a vacation for many people. But try living that vacation lifestyle for a full-year, and you’re easily at the $62k+ range per person, which is not something we can afford!

Heck, with the hotels alone you’d be spending nearly $27,000 per person per year!! As you can see, we believe there are some massive opportunities for saving on the “typical” vacation, to either leave you with more money in the bank, or enable you to take more frequent (or longer) vacations than you typically would. Thus, $31k for all expenses included (health care, storage, food, lodging, travel, cell phones, etc.), especially being abroad in well-developed countries, seemed quite reasonable as a starting point; we’ll see how the first few months go.

Breaking Down the Budget

After obtaining our high-level budget target, we could now move on to allocating a budget for each area.

Here is our break-down by category:

And in terms of monthly dollars (for two people):

As you can see, food and housing take up nearly 50% of our expenses, so we’ll be focusing on ways of reducing those to begin with. However, note that even $1,200/month for housing isn’t terribly expensive, since that works out to the equivalent of a $40/night hotel (and now you’re probably saying no thanks! I don’t like motels and hostels! But give us a chance to show you how we’ll do it while still living in beautiful, private houses with washers, kitchens, and even some pools); that’s likely on par with, or even cheaper than, the cost of your mortgage payment or rent in your area, so we’ll be showing how it’s possible to achieve these targets while traveling in style.

Also note that we gave ourselves a healthy $1,000 “Entertainment” budget for each month, as well as a “Discretionary” (e.g. alcohol, random splurging, etc.) line item. As we mentioned, while we do want to live frugally, we want to ensure that we’re still experiencing each location and culture to the maximum and not necessarily eating ramen noodles each night and staying locked up in our Airbnb, so it was important that we put a line item in there for both of those things.

Budgeting Summary

We will be tracking both our monthly and our cumulative budget for the year and providing updates at the end of each month. We’ll show where we were able to save (and how), and also areas that perhaps didn’t go as well as planned. We know that we may need to adjust the budget as we go along, but that is all part of the process.

For an archive of our budget summaries by month, visit our budget page here.

If you have any specific questions about our budget, our travel, or any other areas that you’d like to learn more about, please leave us a comment so we can visit those topics in future blog posts!

*Note: I am sure some people out there are now saying “Yeah, Brian, but we work hard the rest of the year and we deserve to splurge on vacation! The whole reason we go is to relax, so we don’t have to do our own cooking, cleaning, etc.!” Completely agreed. But if someone offered to write you a check for an extra $100, $300, or even more, for essentially no extra effort, would you take it? We don’t want to suggest that people need to sacrifice the quality of their vacations to save; we plan to show that there are in fact ways that you can still maximize your experience while minimizing the cost. In the end, everyone needs to do what is right for themselves.