Managing Our Money
You know that I don’t think it’s ‘luck’ that allows a person to travel. I think you have to have your eye on the prize, be willing to make sacrifices, and save, save, save!
Travel doesn’t have to be expensive; and saving for travel doesn’t have to be painful.
The cost of a trip varies greatly depending on where you want to go. Europe is notoriously expensive but I’ve heard that bargains can be found in northern Italy and Spain. We found Vietnam and Laos to be as cheap as legend says they are but we’re expecting Japan to cost us a pretty penny.
Overall, long term travel is cheaper than short term vacations. Distances between even major destinations are much shorter than traveling from ‘home’ and back every time. Local air carriers can be used and even ground transportation is possible. Mindset is different for long term travel also; without the need to do it all while you’re on vacation, you can relax and take things at a slower, less expensive, pace.
Figuring out a budget can be the hardest part but there is plenty of information out there now to help you figure out a typical budget:
Warren and Betsy of Married With Luggage run the RTW Expenses site solely to provide information on what it has cost them to travel long term.
Lauren of Never Ending Footsteps also posts a monthly summary of her finances on the road. Mostly Asia so far but I know she has recently been in Europe and is currently in Africa!
Jeremy of Living The Dream has a detailed account of every dime he spent while traveling. With lots of Asia and Europe in his travel resume he gives some great balance to the budget.
The Aussie Nomad focuses on Europe in this series of daily budget posts.
There is often plenty of information on Europe and Asia whereas South America and Africa budget posts are harder to come by. Simon and Erin have a great round up from their time in South America.
I also have budget series from our RTW trip as well as a detailed spreadsheet of what we spent in the 14 countries we visited. I’m planning the same kind of detail for Japan; I’ll be sure to post it once we’re back!
It’s important, when visiting these sites, to not just read the budget posts. You need to get a sense of who is spending this money; are they uber-budget-backpackers who would happily sleep in a 13 person dorm room, or luxury travellers for whom 3 star hotels are an abomination? I always get to know the writer and make sure that they travel in a way that is comfortable for me.
Which brings up probably the most important point; be honest about how you are willing to travel. Don’t plan on a backpacker budget if that’s not really how you travel – you’ll be miserable on $25/day and will begrudge every dollar over that you spend. It doesn’t have to cost a lot to travel but it’s worth saving what you’ll need to travel happily.
Here are some of my own travel saving tips:
- Open a dedicated savings account. Name it. Our current one is called OneGiantStep Goes To Japan.
- Think about what you’re spending. Those two beers tonight? That’ll easily pay for a bungalow for a night on a Thai beach.
- Put all ‘extra’ money into the account. Pocket change, birthday money, pennies from the couch, anything extra. It all adds up.
- Get a side job . Paper route? Barista? Slinging beers? Freelance writing? Whatever talent you have – pimp it!
- Connect to the saving. Keep that trip forefront in your mind – post pictures, use screensavers, read articles/blogs- it’s easier to save if you are always thinking of the end goal.
- Know how much it’s going to cost. You have to know the goal!
- Sell stuff. What is in that spare room anyway? Do you really need that second set of golf clubs? What about that pile of books? That snowboard you didn’t use at all last year?
- Keep track of what you make AND what you spend NOW, before you go. It’s much easier to keep track of what you’re spending while travelling if you’re in the habit of doing it before you leave. We’ve traditionally used spreadsheets for this but recently have started using Mint.com – it’s integrated with your banking and credit cards to help track and categorize spending. You can set budgets with it and know if you’re overspending in a certain area – it’s a great tool to get a handle on where all those dollars are actually going as opposed to where you think they’re going.And don’t forget about the free tax software that’s available too – remember, every penny counts!!
If you plan properly and honestly, put some effort into saving, and sacrifice just once in a while, you too can be ‘lucky’ in travel!
Share your saving-for-travel tips below…how are you getting lucky?
Photo Credit: Thomas Hawk
So you’ve saved and saved and saved, put away your refund determined by a tax estimator, and now it’s finally time to hit the road. How are you going to manage that wad of cash while you’re away? The more thought and planning that you put into this before you leave, the easier it will all go while you’re on the road.
Managing The Bank Accounts
We used a two tiered bank account system:
- Our primary savings account was with a brick and mortar bank in our home town. This account was the highest interest savings account we could find so that we could maximize the money our money was making for us while we were away.
- Our daily use account was with an on-line bank that offered free ATM withdrawals in foreign countries. We kept at most $2000 at a time in this account and, as it depleted, we would transfer money to it from the primary savings account. We set this account up as a ‘bill payment’ on the primary account and would simply electronically pay the bill to fill up the account.
Our main method of obtaining cash while we were away was ATM’s. We had barely any trouble finding bank machines everywhere we went. Every major city or town has at least one. If we were heading somewhere very small we would make sure we had taken enough out already. Even Laos, which by all accounts had a dearth of ATM’s, had more than enough to make access easy.
Depending on the local ATM fees (remember, our bank account didn’t charge any ATM fees but sometimes the local machine itself does), we would take out enough money to last a couple of days. Cash is king on the road so this meant we always had to have enough to cover transport, hotel, food, drink and entertainment.
Have a back up!!! We carried two ATM cards each for our daily bank account and an additional ATM card each for the savings account. We never kept all of these in the same place for obvious reasons.
The need for this became abundantly clear on the day that the ATM machine in Nha Trang, Vietnam munched on Jason’s’ card. We watched in horror as it repeatedly didn’t spit it out all the way and kept sucking it back in…and then it stopped trying and just kept it. Bummer.
We used credit cards only for airline tickets and to secure reservations (if needed). The interest charged on credit cards is outrageous and so we paid the balance as soon as possible from our savings account. We used credit cards only for the convenience of them…it’s hard to pay for an online airline ticket with cash!
Ca$h Is King!
Cash ruled the world everywhere we went. Most places don’t take credit cards never mind debit cards and, even if they do, they likely charge more for the privilege (it costs them so they pass the cost on to you).
Never accept torn, ripped, dirty or wrinkled bills…if you do you are being used as a dumping ground for these bills. Merchants will often refuse bills that are torn, ripped, dirty or wrinkled too much so you shouldn’t accept them either.
Back Up To The Back Up
We carried $500US cash in our bags as the ultimate backup. We had heard that some visas and entry fees could only be paid in US cash (and found that to be true) so we brought this along for those occasions. We made sure that the bank issued us crisp, clean, unmarked, whole bills and kept them in that state as we travelled. Once in a while we found an ATM that dispensed US dollars (I have no idea why) and so we would top up this fund at that time, although the original $500 would have gotten us through.
Try to limit the cash you need to exchange at a border crossing – you will most definitely get ripped off. Not only is it a bad exchange rate but we found that sheisters tried (and succeeded) in confusing us by talking quickly, quoting exchange rates from one currency to American dollars and then into the second currency, and pushing to have the transaction take place quickly. More than once we walked away thinking ‘hey, wait a minute’…but it was done. We instituted a policy that we both had to understand and agree to the math before we made an exchange. If you want to get ahead of the game, click here to order your foreign currency before you get to your destination. That way you can avoid being ripped off!
Keep Track Of Every Dime
Always know the state of the budget. It’s fine to be over (and even better to be under!) but you should know where it’s going and have some idea whether you can make it up or not. The last thing you want is to run out of money before you run out of time!!
I set up a spreadsheet before we left that tracked all the money in about 6 categories (you can check it out here). We had a budget notebook with us all the time and would simply write down all the money we spent. Every couple of days I would update the spreadsheet – I had already set it all up to do the math so could keep track of it all very easily.
I know this sounds like a no-brainer…and it is…the more money you can put away the better off you will be on the road. No-one likes to worry about how much they have, or how much they are burning through so the more you can save the better.
First off…stop digging the hole! Stop accumulating whatever debt you are accumulating. No more ‘pay-as-you-go’, no more ‘don’t-pay-until-next-year’, no more ‘just-put-it-on-the-credit-card’. Just. Stop.
Then, work towards filling the hole. Pay off debts aggressively. Debt is costing you money and giving no reward. Once the debt is gone, all that money spent paying it off is now building the pile ‘o money that will be yours!
We made plenty of sacrifices so that we would have enough for our trip. We tracked all our spending so we would know where every dollar was going (a habit we keep to this day) and we increased our consciousness about spending money, asking ourselves whether we really needed an item or just really wanted it. Every purchase was compared to ‘how many days in Thailand’ it cost. It really worked and constantly reminded us of the bigger goal that we had.
We ate out at restaurants way less often (one of our fave things to do), we didn’t go on any mountain biking trips that year, didn’t buy any new clothes and moved into a cheap rental once we had sold our condo.
Any money that didn’t need to be spent, wasn’t. Eye on the prize baby!
Find A Good Bank That Will Help You
I know, sounds impossible, but some are better than others and, if you do your homework you might find one that is better. It’s worth the time to look.
Banking fees were a significant portion of our budget…about 2%…so it was important to make sure we were getting what we needed and spending the least amount to get it.
Our primary concerns were:
- Account Security. We had a pool of money that would gradually diminish as the year went on but we didn’t want it all to be accessible at once for security reasons. What if someone got hold of our cards and could gain access to the whole pile? So we set up a system of bank accounts to which our cards only had access to one. We were able to electronically transfer money to keep this one account filled up as we needed. Alternately you could schedule payments from one account to another.
- Banking Fees. We wanted an account the would give us the greatest interest rate but the lowest banking fees…no point spending money to store your money! Many accounts waive fees if you have a certain amount in them all the time. Seeing as we had enough money to cover this minimum we managed to reduce our fees significantly.
- ATM Fees. Our plan was to use ATMs almost exclusively to access cash so we needed a plan that would minimize these costs. Some banks charge up to $5 per transaction at a foreign ATM machine…and that’s on top of the local fee that the ATM machine may charge! Many ATMs have a daily limit that you can withdraw and so we would have to make multiple withdrawals to have enough cash…and would be charged for every withdrawal. Ouch! We managed to find a bank that charged zero ATM fees, foreign or otherwise. Score!!
- Credit Cards. You need a big name card. Visa or Mastercard are where it’s at in the rest of the world. Actually, ca$h is king, but if you’re going to carry a credit card (and you should) then it should be one of these two. Find one with the lowest interest rate possible and beware of exchange rate premiums that may apply. Read the fine print…out of country rules may be different than in country rules.A credit card with a reward or travel points system may actually help pay for your travels! Look into the possibilities.
Don’t be afraid to change banking providers if you find that your current bank can’t (or won’t) help you. Our long term bank was absolutely inflexible with regard to fees etc. We had evidence of another bank that would be able to help us, but they still could not bring enough to the table to make us stay.
Don’t negate on-line banks. Our end case scenario involved a ‘brick and mortar’ bank that had an on-line affiliated bank. The combination of the two met all our above needs and worked like a dream.
Remember it’s your money!!
Power Of Attorney
Ugh! It just gets drier and boring-er, doesn’t it? But this piece is what gave us the most piece of mind.
Sure, we thought we had accounted for every financial scenario, had dotted all our i’s and crossed all our t’s…but what if we forgot something? How were we going to manage it while we were on the other side of the world? We asked someone to be our Power Of Attorney.
- Choose someone you absolutely trust. Remember, they will have access to your money. Whether it’s a family member or a friend, it has to be someone that absolutely has your best interests at heart.
- Check with your bank as to how this is done. It may be as simple as you writing a letter or, as in our case, you may need to all head to the bank to have paperwork signed.
- Learn the conditions of the PoA. Ours allowed our friend to deposit money, withdraw money and write cheques on one account but did not allow access to all the accounts or the investments. This protects everyone involved.
We ended up using our Power of Attorney more than we thought we would. A couple of unexpected bills showed up that he could take care of for us and, while arranging to come home, he took care of the rental deposit etc so we could have a place to live. Thanks Ron!!
It’s about more than saving money…it’s about managing your money.
Are there any other things you have done to financially prepare for a big trip?