Setting Up a Travel Budget

A few people have asked me about traveling on a budget. I thought I’d be able to handle this topic in one quick post, but when I started writing it turns out there are a lot of steps that I do sort of intuitively at this point. I didn’t realize how much there was to say! It was too much information for a single post, so today I’m just going to talk about establishing an annual travel budget and how I break down each trip’s budget. I’ll talk about actually finding deals on travel in follow-on posts.

One of my absolute favorite things to do is travel. I’ve been averaging 4-6 trips each year for the past decade, and I wish it were more. In fact, I’m hoping that when I retire I will be a semi-permanent nomad. Live a few months here, a few months there, a month overseas… That’s the dream.

But travel can be very expensive. In order to keep my travel budget in check, I’ve developed a process. It may not work for you, but it works for me.

Developing My Annual Travel Budget

Towards the end of each year, I set up my overall budget for the year. Maybe I’ll go into details in a later post, but basically here is what I do.

1. Determine my monthly income
2. Allocate money to my needs (shelter, food, taxes)
3. Allocate money to my musts (not necessary to live, but very important to me)
4. Allocate money to my wants (everything else)

Travel falls somewhere in between a must and a want for me. It’s important that I see my family every year, so that falls under the must category. A weekend getaway would be more of a want.

Once I have my overall travel budget for the following year, I start deciding which trips I want to go on and how much money to spend on each. The process is pretty easy for me now because I’ve been doing it for so long. It may require a bit more groundwork for you, if you don’t already have a general idea of how much you spend on travel.

For the purposes of this post, let’s say I can set aside $400 per month for travel. That’s $4,800 total for the year.

Trips Home

First, I designate $1000 for trips to visit my family. Each visit costs about $500, with airfare costing about $200-300 depending on where I’m living that year and the rest being used for other expenses. Since I’m going home, I don’t have to worry about hotel costs. My parents always loan me a car while I’m there, so I don’t need to worry about that either. I’m usually eating mostly homemade meals and hanging out with family, so my overall costs are low. These are obviously the easiest trips to budget, since it’s basically the same expenses every time.

Pricing Out a Trip

Since the costs to travel home don’t vary much, I don’t bother pricing them out in detail. For the rest of my trips, I go through my expected expenses to set up a ballpark budget. There are eight basic costs I account for every time I plan a trip.

• Travel to/from the vacation destination
• Transportation at the destination
• Lodging
• Food
• Activities
• Souvenirs
• Pet boarding
• Miscellaneous (includes tips, unexpected expenses, etc)

Not all vacations will include all of these expenses. For instance, maybe a friend will watch my dog or maybe I can take him with me. But I keep this list handy because it reminds me to consider the main elements of any trip.

My Budget Trip Planning Process

When I first decide my trips for the year, I’ll guesstimate how much each element will cost. I fill in a spreadsheet with those costs as a placeholder to determine my ballpark budget. Later, as I start determining the particulars of my trip, I look for opportunities to save money. I try to never go over my original budget, and I’m usually pretty successful. Here’s what the ballpark budgeting looks like on my spreadsheet.

If you add that up with the $1,000 for trips home, you probably think I’ve overbudgeted.

$1000 + $2345 + $1310 + $470 = $5,125 total, which is $325 over budget

I normally receive about $400-$500 in value from credit card miles each year, so actually I am slightly underbudget. Also, once I start pricing out the details of the trip I am bound to lower the cost of some of these items. I inevitably end up right around what I budgeted, or less.

Some insight into my thought process

• If you look at those numbers, they might seem strange. For instance, why is my 8- to 10-day lodging budget only twice that of a 3-day wedding? When I travel for longer periods, I often rent through a service such as AirBnB instead of a hotel room. By doing this, I get more space, more amenities such as a kitchen and laundry, and a lower nightly cost.
  • Conversely, for a shorter stay I might splurge on a 5-star hotel.
• For the “long weekend” trip, I imagined going to a cabin within a few hours driving distance. I’d be able to bring my dog, I likely wouldn’t buy any souvenirs, and travel would be cheap because I could drive there. This means I can afford to splurge a bit on food – $150 over two nights will buy some nice meals. If you think these numbers are unreasonable, check out my trip to Strasbourg, France, where I spent less than $91 on some amazing food over three days.

Final Thoughts

You may have noticed that these numbers are for a single person. Since I am single, that is how I plan for many of my trips. However, I know that isn’t the case for everybody. I’ll be posting a case study soon that shows a family vacation and how much they might spend on an eight day trip to Disney World. The same principles I use can apply to family trips, with the bonus of not needing to get a separate hotel room for each person. Huzzah!

So that’s how I budget for travel each year. Nothing cosmic, but one thing that has really helped me is picking a budget well in advance and sticking to it. For me, it has made the difference between stressing over how much a vacation is going to cost and knowing that I can afford it. Figuring out exactly what I’m going to spend on each trip and how to lower costs is a different issue, but like I said – we’ll leave that to another day.

How do you budget for vacations? Do you plan it out carefully, or just wing it?