How to Plan Financially for Long Term Travel
Traveling long term is one of our favorite things to undertake here in Fantasium. It’s an experience that everyone should undertake at some point in their lives. It’s never to late to get out and take your dream trip around the world!
We know that one of the biggest barriers to long term travel can be finances. Many of us have financial commitments that can be hard to get away from. However, with a little bit of careful planning and a change of your mindset when it comes to your spending, you can be on the road to saving up for long term travel - and potentially even spend less money traveling than you would at home!
This article is geared towards helping you get your finances in order from the moment you decide to take the journey of a lifetime all the way through the bittersweet last day of your travels. We understand that everyone has different ways of managing their finances, so we have provided broad guidelines as well as specific action items (and a spreadsheet!) for those that might want a more specific, structured experience.
Step 1 - Pre Travel Budgeting, Cost Cutting, Saving
Your financial journey starts the minute you make the decision to take your trip. There might seem like there are a million things to take care of, but generally planning for long term traveling can be broken down into a few simple categories - departure, costs while traveling, costs at home, income while traveling, and return costs.
It helps to start broad, and then break down those bigger categories in to smaller ones. A budget is key to determining what you’ll need for each stage of your travels. Your budget can be as simple as notes on a scratch piece of paper, or you can throw it in Excel with formulas and conditioning. Whatever works for you works best - but it’s critical to determine not only how much you’ll need to get started on your travels, but how much you’ll need along the way.
As you’re working through these steps, start by getting out a paper and pen and writing down some different categories of expenses you’ll need to account for. Don’t worry about getting too specific or exact in this stage. The purpose of it right now is to ensure you have everything you need to plan for down on paper so you can start researching it more in depth as you accelerate your planning.
Saving Money to Depart
The first step is to determine how much money you will need to save in order to cover your departure expenses. This includes but isn’t limited to flights, visas, miscellaneous travel expenses, busses, boats, lodging, food - basically whatever you will need to get to where you are going. It can be tempting to throw these on a credit card and expedite your trip, but try to avoid that if possible!
Another note - take whatever you calculate and add about 10%. Everything, and I mean everything, winds up costing a bit more when you’re traveling.
Some other categories you’ll want to consider are covered before departure are:
Travel / health insurance. We highly recommend getting at least travel insurance before departing for a long term trip. This covers most emergencies but can even extend to things like technology insurance and lost baggage coverage. World Nomads is an extremely popular and well reputed travel insurance option. Travel insurance doesn’t cover health expenses, however. In some countries health care can be super cheap, so do your research before you go. However, if you can afford it, a health insurance plan is never a bad thing to have. GeoBlue has awesome health insurance plans for world travelers.
Any equipment / supplies needed. The right travel bag, new boots, a kindle for entertainment…you’ll definitely want to invest in a few new purchases if this is your first trip.
Doctor’s appointments or medical clearance. Some countries may require certain vaccinations to visit. If you have a pre-existing condition or require certain medications, you’ll of course want to make sure you take care of that before leaving.
Saving Money for Travel Costs
Here is going to be the challenging part. If you won’t be working during your travels (highly recommended!) you’ll need to save up enough money to get you through that entire time. A handy way to determine how much you’ll need is to divide your time into easily measurable periods - i.e. weeks or months - and multiply it by how much you think you will need during each period. For example, if you want to travel for 6 months, and you think you’ll need $1000 a month, you will need to save up $6,000 for this time period. Again, just like with our departure expenses, add 10% to this to give yourself some wiggle room.
Some things you’ll need to take into account for your travel period are:
Food. Eating is one of the great joys of traveling. Make sure you’ve got enough money to sample the wonderful cuisine from new parts of the world! One way to save money on food is by staying somewhere with a kitchen and cooking your own meals from time to time. Eating out for every meal can be tempting, but if you really want to stretch your food budget, do your best to shop at a grocery or market the majority of the time.
Lodging. This will be one of the most difficult expenses to determine and plan for. Many people have different standards of lodging, so be honest with yourself when thinking about how much you’ll need to spend on accommodations. As mentioned above, look for a place with a kitchen where you can cook your own meals to save money on food. If you’ll be in a location for a long period of time you can potentially volunteer at a hostel or bed & breakfast in exchange for your room costs, which can save you boatloads of money! Workaway is also a great resource for those looking to work in exchange for lodging. Finally, it can be nice to save some money on lodging, but don’t ruin your experience by saving $5 for a night in a location that is not scenic or more importantly, not safe. Take my word for it - I saved $20 on a hotel once on a return trip and probably almost got murdered because I chose lodgings in an unsafe part of town.
Activities. What will you be doing while you are traveling? Here you can bucket things like going to parks, parties, any language lessons or classes you might take, and any recreation you’ll be taking part in.
Cell Phone or Internet Costs. These days it’s easier than ever to snag a SIM card from the local cellular network provider, plug it into your phone, and have cell service halfway around the world. One nice thing about traveling is disconnecting from the world, but it’s nice to have a cell connection in case of an emergency.
Emergency Fund. Speaking of emergencies, it’s critical to always plan for them. We recommend setting aside at least $1000 - or having a credit card with a high credit limit - to use in case of an emergency.
Saving Money For At Home Expenses
Here is where the spectrum of expenses is going to be very different for lots of folks. Some of us might have a home loan, a pet, or other fixed costs that we will need to continue paying while we are traveling. Again, you’ll want to take the total amount of these costs per month and multiply them by the month’s you’ll spend traveling to get the amount you need to save up for these.
Get creative when thinking about ways to reduce these while you’re gone. If you own a home, rent it out while you’re gone. If you have car payments, call your bank to see if you can go into deferment for a few months. Recurring expenses that aren’t contributing to your travels are a huge limitation on what you can do and how much time you can spend, so think very hard about what expenses you’ll need to cover while you are gone, and what you can do to reduce these to an absolute minimum.
Cutting Current Expenses
Up to this point we’ve probably impressed it into your skull that saving is the key to the start of your adventures. However, if you really want to expedite your travels, the way to do it is by putting your savings first and all other expenses second. This is where your budget is going to come in handy. Itemize your expenses and cut out anything that is not absolutely necessary. Split your Netflix with a roommate, cancel your cable subscription, limit yourself to eating out once a week - the more expenses you can remove from your day to day living the more you can save, and the sooner you’ll be off on your trip. Here are some ideas to reduce your costs and increase your savings.
Subscriptions. Most of us spend more on monthly subscriptions that we realize. Take stock of yours, and unsubscribe from anything that you can live without.
Gas, Car Insurance, Car. Cars are expensive to own man. You’ve got to pump gas into them, pay for insurance, and pay for maintenance. If you have a car payment and you can get around without a vehicle, considering selling your car. At the very least you can always put it into storage and move your insurance policy to cover your car only in storage. This is something you’ll absolutely want to do when you depart as it can decrease your car insurance payment to only a few dollars a month.
Eating and drinking. It’s easy to spend too much on eating out and good beer. We know from experience that this segment of the budget can add up quick. Keep it under control by assigning a certain amount that you can spend, and not allowing yourself to exceed that amount.
Entertainment. Concerts, events, and weekend trips are fun, but to effectively save for your travels you’ll need to cut them out. You’re deferring your enjoyment now for enjoyment later.
Rent. For most of us rent is a huge percentage of our monthly budget. If you can move in with parents for just a few months (you won’t want to pay rent when you leave anyways) you can save an insane amount of money.
Shopping / Spending Money. Don’t do it. Just don’t.
Step 2 - Budgeting During Your Travels
You’ve saved up all of the money you need to leave and everything you need to travel - what an incredible feeling! Now it’s time to depart and enjoy your hard work you put over the last months or years.
But wait! Your financial vigilance shouldn’t end here. In order to get the maximum enjoyment and as squeeze as much time as you can from your adventures, you’ll need to find some sort of way to track your expenses (and potentially incomes) and keep scratching that traveling itch.
Creating a System to Track Cash Flow
Just like in our normal lives, we need to ensure we aren’t spending more money than we have when we are traveling. This can be a tempting rule to break, especially at the beginning of your travels. It can be easy to adopt a “fuck it” mentality; you’ve got lots of money in the bank, you’ll be fine, right? Don’t get me wrong, it’s nice to splurge when you have some extra cash, but by being smart about it and saying no to some things, you can do what you like for 12 months rather than only 6.
Remember when we determined how much we would need each month before we left? Stick to that amount the best that you can. Find a way to allocate that amount to each month, and don’t spend more than that (unless you had planned to spend more in certain months). One way I like to do this is by having more than one account setup with my bank - either two checking accounts (more flexible for transfers) or two savings accounts. Designate one account as your cash account, and transfer the amount you have available to spend that month into that account. This will help you keep a real time eye on what you actually have available without spending your time updating spreadsheets with expenses.
Generating Income While Traveling
This is one of our favorite topics of this whole article. There are so many fun and creative ways to generate income while you are traveling to help you extend your journeys. The advent of the internet has expanded these options drastically, but there are lots of offline jobs available to help you save on expenses or generate some spending money while you’re traveling!
Work Remotely. I personally did this while living abroad and traveling around the United States, and it was a ridiculous feeling to be living in a completely different part of the world, with no obligations and minimal expenses, making more than I made before I left. If you have a job that you can do while living abroad, do it. It drastically reduces the amount you need to save up for your travels. The only downside is that you will have to devote time traveling to your job, which can definitely be difficult sometimes! If you don’t need lots of income while you’re traveling, part time or contract work are also great options for more of a balance.
Freelance Work. If you have a job where you can work on specific projects for clients, freelance work is easy to obtain. You can find jobs on sites like freelancer.com. There are also lots of flexible, work when you want jobs out there like Rev or teaching languages online!
Passive Income. Generating passive income is a difficult thing to start, but if you can create your own business that runs without you needed to be involved day to day, it’s the ultimate way to travel. Dropshipping, software services, online workshops, and basically any business where you can make repeated sales without having to fulfill the orders each day are options. This is the hardest job on the list to fulfill, but can definitely be the most rewarding! If you want some inspiration, check out Tim Ferriss’s book, The 4-Hour Workweek.
Find a job in your destination. This is probably the easiest, and sometimes the most fun, way of earning some money while you travel. If you’ll be living in one place for some time (which we highly recommend) you can find a job in the local area. Bartending and the restaurant industry are surefire bets if you have experience in those jobs. Depending on where you are located, the tourism industry is sure to be hiring as well. Dive instructors have it easy for this category - they can travel to any paradise location and have a job open up for them!
Step 3 - Knowing How Much You’ll Need To Get Home
This final step is a bit depressing since it forces you to think about the day that your trip will be over. However, it’s still important to consider. Set aside however much money you’ll need for your plane ticket home and any traveling expenses. It’s recommended that you do this before you leave and combine it into an account with your emergency fund.
It’s not an easy thing to do, but saving for a trip and making sacrifices in your day to day life can be one of the most rewarding things you do. Getting away from your day to day lifestyle that you’ve been in for years and experiencing a world where your responsibilities, your commitments, the constant phone calls and emails, all fall away is a life changing feeling. Most of us are brought up with a sense of responsibility to work, to our bank accounts, to others, and this isn’t a bad thing by any means. Many times in life though we need to focus on our own lives. It’s not wrong to want to do something for yourself.
Here is a simple budget template that you can use to plan your travels and to keep track of your spending during your travels. Download the spreadsheet or save it to a Google drive, then enter in your expenses in the top section and your incomes in the bottom section. This will give you an idea of where you are at with your budget and where you might be able to make adjustments.
Do you have any tips here that we might have missed? What are some of your financial lessons you’ve learned while traveling? We would love to hear from you in the comments!