Travel Finances
As in the rest of life finding the money for a trip of the lifetime is balancing act of what you can afford and how much will it cost. Retirement planners talk about having a balance of growth-orientated and income producing assets and your investment time-frame. Long term budget travel is pretty much the same: the balance between your budget, your time-frame and what might be called your pain factor. The slower you travel the less you generally spend per day - the beach in Asia really can be very, very cheap. The pain factor is how much are you prepared to rough it. Your choice of destination is critical: if your budget is US$30 per day in Vietnam you will be staying in comfortable hotels, eating in nice restaurants, enjoying the odd beer or three and taking a taxi home. In Europe for the same budget you will be in a dorm room in a hostel, self-catering and coming to grips with the local bus timetable.
What will it cost.
Probably one of the most often asked on the travel boards questions - how much will it cost? Its a general question and as such unanswerable. However the answer for your specific circumstances is not so hard to work out:
- Pre departure expenses. As soon as you decide to leave home you will find a bombardment of "essential" travel gadgets that you better not leave home without read more on pre-departure expenses
- On the road travel budget. Everyday expenses are usually the first thing people consider when budgeting a trip read more about on the road expenses
- On going costs at home. Some costs just don't go away especially if you are too old to move all your stuff back the parent's garage. Also, it is probably best to have a safety net read more on costs at home
Total up all of the above costs, multiple your daily costs by the number of days you plan to be away, add 5-10% as a safety buffer and there you have the total cost.
How can I pay for it.
So having picked yourself up from the budgeting exercise above the next question is how on earth am I going to pay for it. There are really only two ways to pay for your trip : :
Any combination of the above will do. Most younger backpackers probably subscribe to the former - save as much cash as possible (and put the rest of the trip on the credit card ! ). However older travellers who may be looking at travel in the context of semi-retirement or a career break should also look at the second item, on going income. As people work and live tend to accumulate more assets which in turn have potential to earn income. For example - you want to fund a 6 month trip to Australia and you have worked out that this will cost the two of you $4,200 / month plus $3,000 up front costs (airfares, gear etc) plus $5,000 to buy a vehicle, plus 10% say contingency so a grand total of $36,000 . (These costs are based on vaguely realistic scenario in Australian dollars but the principal holds regardless of the currency).
To pay for it you could either
- Save $36,000 or
- Have an income of $6000 a month which doesn't require you being at home to gain that income or
- A combination - maybe rent out your home to net $2,500 a month and use $21,000 of savings. Hang on - if you have only worked part of the tax year you may be due a refund. Say you are owed $6,000 by the Tax Man. Now you only need $15,000 of savings - is this looking more achievable?
Thinking outside the square is the key here:
- sell excess assets: cars, boats, excess furniture, toys....
- reduce expenses: look at your insurances do you need them all; decide to stop giving presents within the family;