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There is no doubt that when we get back on a plane and fly to another country, the experience will be very different from what we remember. There is a good chance that the lines at airport security will be a little longer, that the places we visit will have a slightly lower population density, and that our reasons for traveling will be different.
However, one aspect of traveling will never change: the way we plan and pay for vacations and other trips. Obtaining funds for an upcoming vacation is a challenge that every traveler faces at some point. It makes no difference where you’re going or how long you’ll be gone; every traveler must deal with this.
Days to Come sat down (virtually, of course) with Nora Dunn, aka the Professional Hobo, to talk about all things travel and finance. Given that planning a travel budget is an important part of any trip, this discussion covered a wide range of topics.
Nora has a professional background in financial planning and has been traveling full-time for the past 12 years, so she is well-versed in the most effective strategies for meeting your savings goals while traveling. And, luckily for us, she has agreed to share some of her most valuable insights and recommendations with us in the following sections.
What are some simple steps that people can take on a daily basis to start saving money for the vacation destination of their dreams?
We’re not even discussing travel budgeting here; rather, we’re talking about money management and cash flow management. We’re talking about basic budgeting here, not travel budgeting. Your first order of business should be to conduct an audit of your spending habits in order to begin the process of saving for a vacation. Keeping track of your expenses is essential if you want to understand how your money is being spent.
There are a plethora of apps available these days that can help in situations like that. I use a couple of different apps because I travel all over the world and keep track of my expenses in multiple currencies. They’re on my phone. If you don’t need the travel component, there are plenty of other apps that can help you keep track of your household expenses. Trail Wallet, one of my favorites, is specifically designed for travelers.
The key is to remember to log all of your financial transactions into the app you’re using as soon as possible after making any kind of purchase, whether in-person or digitally. And avoid passing judgment on yourself. Many people choose not to track it because they believe it is insignificant or because they feel guilty whenever they spend money on something that is not in line with their financial plan. Keep track of every penny that leaves your hands, no matter where it goes or why.
Once you have a basic understanding of your financial situation, you will be able to look at your expenses and say things like, “I didn’t realize I was spending $150 a month at Starbucks.” That works out to $1,800 per year, which I can put toward vacation. Once you’ve determined where your money is going, you can look for ways to cut your spending or reduce the amount of money you spend.
Do you have any recommendations for people who want to travel but need to pay off debts like student loans or a mortgage?
In general, I believe that we should make plans for the future because no one else will; however, I also believe that we should not do so at the expense of enjoying the here and now. This brings me to my second guiding principle in life: everything should be done in moderation.
Having said that, each person’s circumstances are unique. I mean, there are a lot of people out there who are fully committed to their mortgages, student loans, and possibly consumer debt such as credit cards and auto loans, and there is simply nothing left over for them. And if that describes you, you should not be going anywhere. Not until you have a better handle on your debt, because incurring more debt to fund your travels is the single worst decision you could make.
I don’t mind if you charge your trip to your credit card; however, you should only do so if you will be able to pay off the balance in full at the end of each month and avoid paying interest. Because paying interest on something as frivolous as a trip is a clear indication that your priorities aren’t always in the best possible alignment with your overall financial well-being.
What if they are still making debt payments, but have some extra money each month to put toward other things?
If you have any money left over after living expenses after making all of your required debt payments, you should put it into savings as soon as possible. Put it in a high-interest savings account; you don’t want to invest it in something risky because you don’t know whether the value of the money will increase or decrease. If this is the case, you should keep it somewhere, but not in a bank account. A bank account will not help you in any way, but it is very convenient to have.
On the other hand, having money in a savings account that pays a high interest rate will allow you to at least keep up with inflation. To make matters even better, if you know how much money you’ll have left over at the end of each month — say, $25 — set up an automatic payment into a high-interest savings account equal to that amount. This eliminates any excuse you may have had for not putting money aside.
What are some of the things you should think about when making a vacation budget?
It’s amusing, but I get asked about it all the time. When I wrote a book about working while traveling and the travel lifestyle, people begged me for budget templates. However, I refused to give them these templates because travel budgets are fluid and everyone’s situation is different.
Are you interested in going scuba diving?
Now, if all you want to do is relax on the beach, that won’t be nearly as expensive as what you’re proposing. Because they are both beach destinations, transportation will be the same in both cases; however, scuba diving will invariably be more expensive. As a result, the total amount you will spend on your vacation will be highly dependent on the location of your trip, the activities you have planned, and your general preferences.
Having said that, if you start planning your vacation early, you can make determining your travel budget a fun activity. You should start planning your dream vacation with a glass of wine and a day planner. When you have a better idea of what your vacation will entail, the next step is to calculate the costs of each component. Put a number on it, and then decide whether that number represents something you are willing or able to save for, or whether there is something you can change if that number is too high for you.
What are the most effective tools for sticking to your travel budget and effectively managing your finances while traveling?
Trail Wallet apps come in handy in this situation because they allow you to track your expenses both on and off the road, in multiple currencies, see how much money you’ve spent every time you log in, and set budgets for yourself. You’ll have a quick way to assess how well you’re sticking to your financial plan this way. That feature is only available on the iPhone, but I believe Hop Wallet is also available on Android devices. Another one I’ve used is called Travel Spend, and it’s a lot of fun.
Splitter is an excellent app to use if you are planning a trip with others and will be splitting the costs. Again, you can track in multiple currencies, and the program will determine who owes what to whom at the end of the journey. When traveling with friends, it can be difficult to divide the costs of the trip fairly. Having this information on hand can be extremely useful in these situations.
What do you think is the most difficult obstacle that people face when planning a travel budget?
When it comes to budgeting for a trip, I believe the most difficult aspect is that you never know how much money you’ll end up spending. The general rule is to save more money than you think you’ll need at any given time. Because it is almost certain that you will come across something that costs more than you expected.
As a result, I always try to err on the side of caution. When I make a budget, I always make it larger than I think I need it to be, so I have some wiggle room when I’m on the road.
Another interesting phenomenon that happens when you travel is that you develop the mentality of “screw it, I’m on vacation.” The time has come when you are confronted with something that was not in the budget but appears to be cool. As a result, you decide, “Screw it, I’m going to spend money I don’t have on something I want to see, do, or have.”
As a result, include it in your budget. In your financial plan, you could even include a category labeled “screw it, I’m on vacation.” However, once you’ve spent that much money and are presented with the opportunity to say “screw it, I’m on vacation,” you have no choice but to decline. As a result, some level of self-control is required at all times.
Have you noticed anything unusual about how different vacationers plan their finances and spend their money while away?
When I was in Hawaii, I went out for Taco Tuesday with a group of other travelers, and it was fascinating to see how everyone else chose to experience Taco Tuesday.
So there was this couple who had just completed a world tour, and because they were short on cash, they ate dinner before going out to celebrate their accomplishment. They didn’t have any tacos, but they made sure to budget enough money so that everyone could share a beer.
Another person decided that the beer wasn’t worth it, but the tacos were, and that they would eat those instead for dinner. Someone else had snacks beforehand to ensure they wouldn’t be too hungry, allowing them to enjoy one taco and one beer without feeling overly full.
Phil entered the picture next. Phil embodied the “screw it, I’m on vacation” attitude. Despite his lack of funds, he went out and ordered three different taco orders as well as three different beers. Why? Because he is currently with a large group of people, and the occasion calls for a joyous celebration. Phil did not have enough money to last very long on his trip.
We were all having the same experience now: we were all in the same breathtaking location, conversing with one another while sitting around the same table. But it came at a cost that was very different for each of us. As a result, it is up to you to decide how you want to spend your vacation or what is the most important aspect of the trip — what are the necessities and non-negotiables that you must participate in?
What are some of the most useful hints you have for saving money while on vacation?
When traveling, there are numerous ways to save money. Instead of having dinner as your main course, try having lunch. Even if a restaurant serves the same menu for both meals, lunch prices are typically lower than dinner prices.
Breakfast is delicious, but in most cases, it represents the single greatest financial loss. You could go to the supermarket and spend one or two dollars on a croissant, yogurt, and fruit, or you could spend twenty dollars at a restaurant. In any case, the options are available to you.