How To Save Money For Travel

It feels like there’s a million things competing for our hard earned dollars, making it seem impossible to save money for travel.

However, spending time to become familiar with your spending habits, understanding key places to reduce expenses, and then implementing them, works!

My step-by-step guide on how to save money for travel will help make your dream trip, or world travel, a reality.

Getting Started

Start by looking at your spending history over the past few years. Note how much you’ve spent, and saved, annually. This provides an idea of how aggressive you need to be.

You also need to have a savings goal. If you’re not sure how much you need to save for traveling, skip down to the ‘How Much Money Do I Need To Save For Travel’ section, then come back here.

Fixed Expenses

After looking at your spending and saving history, you want to determine where you’re spending that money. The easiest place to start is by listing your fixed expenses. These are expenses that cost the same amount on a regular basis, usually monthly.

Examples of Fixed Expenses

Fixed expenses include your rent/mortgage, home association fees, or dues, cell phone fees, WiFi, water, trash collection, gym, or any other membership fees and dues, and health, car, and, home insurance.

As these expenses occur monthly, any reductions here will repeat monthly, making this a great place to start. Especially as they probably make up a big percentage of your expenses.

List them by their monthly amount, then multiply them by 12 months to get their annual amount (or whatever periodic interval they are).

Each budget is unique, so your list may vary from mine, just try to include them all to minimize surprises later. Also, take note that some of these expenses are discretionary and some are necessities. 

Fixed Expenses That Are Discretionary

Discretionary expenses are those that are not absolutely necessary, thus, they’re often the quickest ways to find savings.

For example, do you really need a monthly gym membership? Or, can you take your exercise outside by running, walking, or riding a bike?

Alternatively, look into using DVDs, free apps, or You Tube videos for your workout. 

Photo by Daniel Reche from Pexels

Do you really need cable or a streaming service? I eliminated this 5 years ago and don’t miss it one bit. I entertain myself in a million other ways, including reading about travel or renting movies. If you really feel you must, research alternatives and cut back to a less expensive option. Or, if you have multiple services, cut back to one. 

Do you really need WiFi? It may be more efficient to get an unlimited data plan on your phone instead. And, if you still have a land line phone, that’s an easy one to eliminate. It’s crazy how much we spend on electronics. Choose the most important one and eliminate the rest.

Fixed Expenses That Are Necessities

Evaluate the necessity fixed expenses too. Changes here may be more challenging to implement, but once you do, the impact can be huge. 

Can you live in a less expensive place? Or take in a renter to offset costs? If you live in a big city, do you really need a car? Or can you drive a less expensive one?

Insurance costs can really get out of control. Sometimes, if you’ve been with an insurance company for a while, they raise your rates, thinking you won’t quote other options.

Talk to friends and see if they get a better deal. Research who is best and quote with multiple companies. I recently did this and cut costs by $900 a year.

Variable Expenses

Next look at your variable, or flexible expenses. These are the costs that fluctuate, or vary, over time. These expenses also contain a mix of both discretionary and necessities. Some, have elements of both.

The closer you cut to the necessity level, the more you will save. Don’t cut too deeply, however, as you may get too frustrated and give up. You need to find a balance you can live with.

Examples of Variable Expenses 

Some variable expenses are daily expenses, like food. Others are monthly, but unlike fixed expenses, they fluctuate, like utilities (electricity, water, or gas). Still others happen periodically, like health care costs, home improvement, or clothing.

Some are even annual, like property, state and income taxes. These are not expenses you have much control over, but you need to make sure you count them in your total.

If you haven’t already been tracking your spending via an app, you may not be sure of your expenses for some of these items. That’s OK. Use your spending history to make an estimate, then track them for a few months. You’ll quickly learn if you need to adjust them.

Food

Food is a great place to minimize expenses. Eating out easily costs many times more than cooking at home. And it’s usually healthier. Even just cutting back on prepared meals, or processed food, and cooking food from scratch can save you a lot.

Do you need expensive cuts of meat? Or can you eat more on chicken, eggs, or tuna? Consider more meatless menus. Make more expensive options, or eating out, a treat, rather than a routine.

Utilities

Utilities are another big bucket to examine. Can you turn down the heat or air conditioning? Especially at night and when you’re not home. Do it manually, or invest in a programmable device. You can even manage some of these from your cell phone.

Entertainment

Entertainment is a discretionary category and can be a big expense if you do a lot of it. Cut back, but still allow yourself some fun. Maybe you only go out with friends once a week, or a couple times a month. Opt to go alcohol free when you do go out. Or, if you must, consider draft beer rather than wine or cocktails.

Also, focus on low cost entertainment, like hiking or entertaining at home, rather that expensive restaurants or pricier entertainment.

Consider rotating dinner parties with friends, where you each take turns cooking meals and entertaining at home. If you all love to travel, create a theme based on a country or region, like Parisian food.

Other Variable Expenses

Clothing, grooming, or beauty products, car and home care, and health care costs, are also variable expenses. As they may occur less regularly, they may be harder to estimate.  Maybe set a limit, lower than previous years and stick to it.

Do you really need to buy a new outfit? Or can you be creative with something already in your closet?

Are you buying expensive health supplements that don’t have proven results? Would you be better off just eating healthier?

Ditch expensive grooming products. There are some great, budget products out there. Plus, if you’re eating healthier and drinking less, you probably look, and feel, better already 😉

These categories can take a lot of will power, as we’re sucked into them by marketing. It is freeing, however, when you realize you really don’t need a lot of this stuff.

Do your own maintenance around the house. Painting rooms yourself is a great, low cost home improvement option. Take care of your own lawn. Fix small things yourself. Little savings add up.

Consider the same for your car. Opt for lower cost auto repair shops rather than going to the dealership. Go one step further and buy parts form an auto part store, that also installs them for a low cost, or free, like Pep Boys or Auto Zone.

Estimate Your New Savings

Sum up your revised fixed and variable expenses, noting them all as annual expenses. Then subtract them from your annual income to see your new savings. 

Review this against how much you want to save (see below). If you think you’ve found enough, in a time frame you’re happy with, great! Start implementing your new plan and saving.

If you still need more savings review the list again. And if you feel you can’t cut any deeper, consider other income opportunities. Sell items you don’t use. Rent out a room in your home. Can you work towards a promotion? Take a new Job? Or take a side job or freelance work?

Your method and intensity will vary depending on where you want to go and how long you want to travel for.

How Much Money Should I Save for Travel?

How much money you need to save for travel depends on the type of travel you want to do, what type of accommodation you want, and how fancy your meals and entertainment will be. 

If you focus on low cost, less touristy destinations, stay in Airbnbs, or hostels, use local transportation, eat out minimally, and stick to budget, or free, sightseeing options, you can estimate on the low end, around $50/day. Doing this in pricier destinations will cost you closer to $100/day.

If you plan to travel to a mix of both low cost and pricier destinations, a good budget estimate is about $85 a day, or somewhere between the two.

$85/day is about 2,500/month (85 x 30 = 2,550). Longer term travel will likely cost less, as you will be amortizing your overseas flight over a longer period.

Nicer lodging in premium destinations, fancier restaurants, or booking inexpensive, organized tours will run you about $200/day, or $6,000/month. And sometimes, depending on location and costs, as high as $300-400/day, or $9,000 – $12,000/month.

$85/Day Budget Expense Example

An example of expenses of $85/day (a good budget travel average) is:

• Room: $25 (Airbnb, home-stay, or hostel)
• Food: $25 ($5 breakfast, $8 lunch, $12 dinner)
• Entertainment: $15 (tickets or entrance fees)
• Transportation: $15
• Miscellaneous: $5
• Total: $85

Of course, each day, and each destination, varies. Check by looking at rooms on Airbnb, or hostels, for your destination. Many even offer free breakfast with the room, or at least free coffee/tea, reducing this even further.

Read travel blogs to find the best spots to visit and associated fees. Look into entertainment passes for reduced rates.

Research how to find low cost flights to get the best deals. In my example above, I amortized a $600 round-trip flight over 60 days, to get $10/day, and still have $5/day for travel at my destination.

Other Tips To Save Money For Travel

How To Stay Inspired

Keep a picture of your dream destination(s) on your office wall, refrigerator, bathroom mirror, phone, or even in your wallet. Something you look at often. Seeing that inspiration will help when your resolve weakens. 

Note your savings on the image or a Post-it note. Count down the months, or weeks, left to hit your goal to keep yourself motivated.

Photo from a trip I took to Santorini

Shift your focus from a negative to a positive, by focusing on your savings, rather than focusing on what your not spending.

This subtle shift can make a big difference. In short, celebrate your savings!

Open a special travel savings account so you can watch them grow.

Use an Expense Tracking App

There are a ton of great apps for tracking expenses and budgeting. Research and try a few before settling on one.

They usually offer charts to show you your expenses by category. Many even allow you to enter goals, so you can see how you’re tracking towards them. 

Look at Your Expenses/Savings as a Daily Amount

Look at your expenses on a cost per day basis, rather than an annual expense.

For example, if your target spending is $36,000 a year, that’s roughly $100/day. It’s much easier to wrap your head around spending $100/day than $36,000/year, as you get feedback daily.

In addition, once you’re used to seeing and thinking about your expenses on a daily basis, making decisions on discretionary expenses becomes much easier. You can quickly see how something as simple as a $5 beer, or a $12 burger sabotages your daily savings goal.

Also, look at your savings as a daily amount. If your goal is to save $6,000, dividing that by 365 days = $17 a day. Knowing that your goal is to reduce expenses by $17 a day makes it much easier to reduce temptation. Also note that that’s the cost of the beer and burger above.

Automate Your Savings

Automate savings by setting up an automatic transfer into your savings account after each paycheck. 

Minimize Bank Fees/Maximize Savings Rates

Research low cost banks to reduce fees. In fact, there’s no reason you should have any bank fees! Understand your banks minimum account levels or use on-line banking. Nerdwallet is a great resource of low fee banks.

Likewise, also research who has the best savings and CD rates. They may/may not be the same bank. Bankrate.com is a great source. 

Research Where, And How, To Purchase, When You Do

When you do need to make purchases, research the best place to buy with internet searches.

Look into credit cards that offer cash back or flyer miles. Nerdwallet and Bankrate, have great overviews. I use my credit cards as much as I can, then pay them off monthly. I choose to earn money by using them, rather than paying banks interest.

Although I haven’t used this myself, I’ve read good things about shopping with the Honey Extension. Once installed on your computer, it will search and apply known promo, or coupon codes to your on-line cart, reducing your cost.

Use Raises, or Bonuses, as a Savings Tool

Any time you get a raise, direct extra cash automatically to your travel savings. You’ve lived off that money before, so do it longer and reap the rewards.

Remember To Think Long Term

Don’t be shortsighted in your goal to save money for travel by forgetting to look at costs over the long run.

For example, renting, or leasing, is more expensive long term. Yes, it costs more up front to buy, but over time, the savings offset the initial outlay.

It’s also important to be putting aside money for retirement, preferably through a 401K. This is best started when young, so don’t skimp here. Coursework assistance

Most employers match your contribution into a 401K up to 4 or 6%. This is FREE money. Take full advantage of it! In fact, I strongly suggest you put in more. These dollars really add up over time, compounded by interest.

I started investing right out of college, even though my initial salary was low, and it’s paid off!

A great book on investing wisely is The Little Book of Common Sense Investing. It’s written by John C. Boyle, the founder of Vanguard, one of the largest investment companies in the world.

I can’t say enough about Vanguard. I’ve been investing with them for 30 years now and their low cost investing philosophy is one of the reasons I’ve been able to retire early and travel.

Summary

Although it can seem intimidating at first, once you follow these steps it’s easy to put together a plan to save money for travel. Plus, once you start, if you make the changes permanent lifestyle changes, you can focus on long term travel!

At the same time, make sure your expectations are realistic. Don’t sweat this too much. Forgive yourself when you can’t reach your goals. Re-adjust and move on. It happens!

Please share other considerations or ideas in the comments below.

Safe Travels!

Julie