Travel Budgeting: How to Plan your finances
One of the most typical questions long term travelers can expect from friends and family is something like: “How can you afford that?”. It seems like taking a sabbatical – whether a full year or just a couple of months – must be financially exhausting. Well, it can be – if you normally live economy but want to travel first class, of course. However, budget travel is not a myth; it might even cost you less than your life back home! However, to make sure all you bases are covered and that you won’t have to resort to the despised ‘begpacking’ or something of the sort, travel budgeting ahead of time will help you get started. And we’re here to help with that. The following article entails travel budgeting tips on how to financially prepare for your adventure abroad. Stick around for the full rundown from top to bottom or skip ahead to the topic most relevant for you:
- Saving Money to Travel
- Doing a Sabbatical
- Short-Term Work Breaks
- Work and Travel Programs
- Become a Digital Nomad
Planning ahead for expenses with these travel budgeting tips
The obvious explanation here is that you try and save as much as possible in the time before your big adventure. The longer you plan ahead the more money you can save up. Some ideas for this are: limiting yourself in going out or eating out, cinema visits, fancy coffee shops vs bringing your travel mug with home brewed coffee to work, etc. The more advanced options are lowering rent by flatsharing or renting out a spare room on Airbnb every now and then, or getting rid of a car and switching to public transportation or bicycle. Other means of financially prepping for travel can also run parallel to your trip abroad.
Saving money to travel
Integrate your travel budgeting into your savings: open a secondary bank account for your trip to which transfer a portion of your savings each month. By putting this money aside, it is directly out of your sight and the risk of using it is lower than walking over to the piggy bank on the shelf, telling yourself you’ll put the money back later, but you really need that shirt, concert ticket, new smartphone, [insert guilty pleasure]. Of course, your options for saving money are very subjective and you have to decide on what you’re willing to sacrifice for the trip of your dreams.
If you have the option, choose a bank that also offers benefits for travelling like low or no costs for taking out foreign currency or paying those by card (for example DKB, Santander, N26). N26 has worked great for us since foreign currency CARD transactions are carried out fee-free (although the bank does charge a 1.7% for foreign currency ATM withdrawals). For German residents, DKB is a good choice, and Santander, present in various European countries, offers similar benefits. Travelers from the US might want to look into Citi, which has branches worldwide and carries a number of travel benefits.
Taking Advantage of a sabbatical through your employer
Another option to put aside that money can be the so-called ‘sabbatical‘. This option depends on your employer, the country you live in and your negotiation skills. Sometimes the term sabbatical is also used as a synonym for a gap year, i. e. unpaid leave. However, what I’m referring to is the option to negotiate with your employer that they will reduce your salary by a specific number for a previously set period and you will get this paid during the time you’re away. As a simplified example: you make 4,000 a month and agree with your employer that the salary will be reduced to 3,000 for 4 years, out of which you only work 3. This means for 3 years you will be working full-time for 75% of the pay and in the fourth year you will be paid the same but without spending a single day at work. In several European countries this is a known possibility and there are several ways of organizing it (6 months work, 6 months off with 50% pay or up to 9 years with 1/9th taken out of your paycheck and paid out in the 10th year). There are several advantages when doing an “official” sabbatical (if you can):
- Job security: You’ll be returning to the same position
- Social security and pension continuity
- Possible aggregate savings on income tax
- A lot less organizing upon return: everything continues as if you never left
Working independently while traveling
The option for those that don’t feel like planning ahead for ages, saving money wherever possible and basically want to get out of the rat race asap. Work & travel as the name implies means that you will not be on the longest holiday of your life but actually work in between your trips, refilling your account in one place before using the money for the next part of your travels. While you will not be lazing at the beach the entire time or doing whatever else you’d like, it does have its benefits too. You’ll actively be part of everyday life in your destination. You get to experience the local lifestyle firsthand, meet loads of new people, expand your skills within the field of work and potentially also in foreign languages. This, of course, largely depends on the country/countries you aim to visit and their work visa restrictions. English teachers seem to be in high demand in Vietnam, for instance, but you need a work permit in order to be offered a position.
Explore websites like Workaway or WWOOF to find projects allowing you to work for room and board if you’d like to work alongside your travels – perhaps at a guesthouse or a shop. However, always make sure you have the appropriate visa status, and be very mindful of the type of volunteering or work you’re about to sign up for, since there are many projects that actually may do more harm than good in the long run – such as many fake orphanage volunteering programs or various building projects that lead to no long-term change. Volutourism is in fact a huge issue that can have a detrimental aggregate effect – despite the good intentions of the western tourists who undertake these projects. If you’re not familiar with why voluntourism can be problematic, check out this article to get started.
The downside to working while traveling, of course, is that you can’t just go exploring the surrounding areas whenever and for how long you like, but you’ll be limited the days/time you have off work. Nevertheless, you’ll likely get a more immersive experience and might be especially fond of it if you like slow travel and taking your time to get to know a place.
The Classic work and travel setup
There are generally two types of work & travel – organizing your own work stints and visas, as described above, or making use of a pre-approved work and travel visa issued by a single destination country. This option is especially valid for the under 30 year olds, or 30-adjacent, as many work and travel visa arrangements have a cut off age. Places like Australia, New Zealand and Canada are the usual suspects for the 1-year work and travel arrangements; however, many countries in SEA make it quite easy to get a work permit for a similar timeframe. Those with an EU passport can of course also do the same while traveling Europe without even having to sign up for anything.
What kind of jobs does work and travel visa entail?
So what can you do while on a work & travel visa? Work and travel jobs can include a great variety of fields, from fruit picking in Australia, working in hospitality in New Zealand, or helping out at a Canadian bakery. The world is your oyster. Or at least parts of it. The added advantage of doing farm work in places like Australia, for instance, is that it’s your ticket to getting a visa extension since these jobs are otherwise hard to fill to capacity. Furthermore, many farms have schedules in place whereby you get a designated number of weeks off after completing a certain amount of work. You can use the time to travel around and explore.
Becoming a digital nomad
The other option is what is mainly labeled as digital nomads, essentially just meaning that you have some skills that will let you work from wherever you are as long as there is a good internet connection. This often includes but is not limited to programmers, web developers, writers, translators, graphic designers or remote consultants. If you’re mulling this option over, take a look at the pros and cons of going digital.
- Can work from anywhere BUT still might have to complete a minimum number of hours
- Flexible BUT accessibility and good internet can be an issue
- Can be lucrative BUT dealing with taxes, insurances, etc. can be more tricky
- You are free to change locations BUT you are still bound to each country’s visa restrictions
Budgeting for travel: Daily Expenses
Saving money for travel is one part, but budgeting for travel expenses day to day is an essential skill to help you make the most of your travel budget once you’re abroad. In order to fist start with travel budgeting, you should have an idea of how much you should expect to spend in each location you visit. This, inevitably, involves some research, but we’ve got some resources for you here with our pages on travel planning and thrifty travel.