All About Budgets Week 1 - How We Pulled This Off

Whether escaping town for the weekend, taking the family to Disneyland over Spring Break, or strapping on a backpack and departing for a year (or two!), a budget is fundamental in ensuring your trip is enjoyable, and that you can afford to return home at all. The ability to create a realistic budget and the conviction to stick to it are skills that all travelers need to acquire; unless of course you are privileged with unlimited funds, in which case this article will be of no help to you and do you mind sharing with us?

Unfortunately budgeting is hard work, and sticking to a budget can be no fun at all if you feel you are depriving yourself of a good time. The solution is to create a realistic budget so when an amazing opportunity presents itself you can afford to seize it. Sound too good to be true? It's not. 

Good budgeting can ensure you don't miss out on amazing once-in-a-lifetime experiences

The first step to creating a budget is to determine how much you can afford to spend. Although it may seem more practical to research how much a city costs first and alter your budget to fit, you can't control prices after all, we prefer to set our budget and then get creative to make it work in the more expensive cities like say, Paris. In doing so we ensure that we can actually afford what we are spending and don't return home only to live in our parent's basement (although we currently are for unrelated reasons...).

And yes, as a result of this budgeting method we have excluded a destination from our itinerary here and there simply because we cannot afford it; however, we have found that we would much rather fully enjoy the places we do get to visit, taking in the attractions we want and eating a meal or two out, than scrimp and sacrifice and beat ourselves up for overspending in an expensive city.

For example, we've recently been toying with the idea of visiting Amsterdam, but upon closer inspection we are struggling to find a hotel for less than $100 CAD per night. Although we could still add it to our itinerary, and would probably love to take in the architecture, culture, and canals, we can also pass it by this time around for something more inline with our budget like Glasgow, and considering Amsterdam is unlikely to lose much of its charm before we can make it back, it's likely we will do just that.

Glasgow is a cheaper alternative than Amsterdam for our upcoming trip

What it really comes down to is how badly do we want to visit a destination and how long can we wait? If your dream destination is pricey but you've always wanted to go perhaps you can, for a shorter period of time. Or, perhaps you want to visit a destination before it becomes too touristy (although it's likely more affordable if not yet discovered). If you simply must visit a pricy area you'll need to figure out how to fit it in your budget, which is another way of saying you need to increase your budget by making more money (not spending what you don't have or going into debt).

One of the questions that we seem to receive the most is "How did you do it?" or more specifically "How could you afford to quit your jobs and travel for four months, with a mortgage and bills at home, without having to declare bankruptcy?" This may have actually been my dad's biggest fear while we were away, that we were going to return home with nothing, completely broke and in desperate need of help. However in reality, we returned home with a healthy savings account. The biggest reason for this is we set a realistic budget - in terms of what things would cost and what we could afford - and we worked until we had enough saved up to afford our trip (and then some - a contingency fund of sorts). 

Because we don't have an income to return to, and are extremely rigid with our financials, the first thing Travis and I do when planning a trip, after determining how much we want to spend, is determine how much we'd like to return home to. With these two figures in mind, we can map out a plan to earn enough money before we leave.

And now what you've been waiting for, some actual numbers instead of rambling...

Our initial budget for four months of travel (through some of Europe's most expensive regions) was $12,000 per person.

Before leaving, we both worked full time and cut back on almost all discretionary spending, to put $60,00 into savings (between the two of us over a five year period)*.

We wanted to come home with at least $35,000 between the two of us to cover our expenses and put towards our next trip.

In 2013 we'd like to travel for five months and spend $10,000 each.

We'd like to save up $15,000 in 2013 (January to September) which would give us $55,000 at the time of departure.

*This may seem like a significant amount, however by breaking it down it becomes much more feasible. To save $30,000 in 5 years, we need to save $6,000 each per year. Working full time for $17.50 per hour (or $35,000 per year) and setting aside 15% of your earnings after tax, you can save approximately $3,675 each year. However, by cutting discretionary spending (coffee, eating out, new clothes) by 10%, your savings increase to 25%, or $6125 per year ($30,625 in 5 years!). This doesn't count any interest earned on your savings AND you are still left with 75% of your earnings to spend on housing, groceries, transportation etc...

When it comes to saving for travel, and setting a budget, prioritization is key. As much as I love a Chai Tea Latte from Starbucks before work, I stopped buying them last year and saved nearly $700 for our trip. I understand not everyone has a great paying job and saving can be difficult, however the good news is that travel is something to work towards, a goal, and although it isn't easily attainable it is so worth while.

Now that we've covered how we saved for our trip,  next week we'll discuss how to figure out how much your next trip will cost... before you hit the road. 

Further reading: All About Budgeting Week 2 - Estimating How Much Your Trip Will Cost 

By Unknown with No comments