If we take the income you are generating from Step 1 and combine it with the lifestyle choices you picked in Step 2, we can create a Budget to show how well you’ll be able to cover your expenses. If your income does not cover your expenses we will need to make some adjustments. But don’t worry - there are a few easy ways to save some more money!
If you find that your income can cover just $500 for each month of your trip, then you simply can't spend $2,000 per month while you're on your trip or you'll run out of money a quarter of the way through. It is important to consider what ends up costing so much money to begin with. The easiest way to decrease your overall costs is to find a way to decrease your daily costs.
For example, let's assume that you are going on a two week vacation to Waikiki, Hawaii and you're leaving from Chicago, Illinois:
Transportation: A round trip ticket from Chicago to Honolulu (closest airport to Waikiki) from July 01 to July 14 will run you $1,072 (the cheapest flight on Booking.com), a cost of $76.57 per day ($1,072/14 Days).
Accommodations: A 2-star hotel would cost you $1,476 ($105.43/night), or a 3-star hotel would cost you $1,997 ($142.64/night), the cheapest ones on kayak.com.
Food: If you bought your food in Waikiki, the average cost per person would be $42 per day according to budgetyourtrip.com ($588 for two weeks), or if you went for budget meals you could likely get by with spending only $18-$35 per day according to priceoftravel.com ($252-$490 for two weeks).
How to save some money:
Transportation: If we changed our travel dates to September 13 to September 26 instead - our airline costs would drop to $733, or $52.36 per day. Timing your vacation has already saved you 31.6%! Or, you could even look at a 1-month vacation from Sept 11 - Oct 11 instead, which would cost you $750. This may seem more expensive by $17, but it will actually lower your daily transportation cost to $24.19 (because the $750 is divided by 30 days instead of 14) - which is 68.4% less than your original daily cost of $76.57 per day!!!
Accommodations: If you chose an Airbnb instead of a hotel, you could get a private room with Wi-Fi, washer, dryer, kitchen, and all the hotel amenities for between $611 to $802, which is $43.64 to $57.29 per night. Getting the $802 Airbnb over the 3-star hotel would save you a whopping 59.8% per day! Similar listings can be found on VRBO.com or booking.com as well.
Food: If you decide to cook your own food for half of your meals (cereal for breakfast counts!), you could get by for around $2 to $5 per meal (which is $6-$15 per day) and drop your spending down to $84-$210 over the two-week period. Even if you dined out at $35 on half of the nights and ate in at a cost of $15 for the other half of the nights, you would still reduce your food costs down to $25 per day on average ($350 for two weeks) saving 40.5% on food!
Either way, it just shows that you could take a two-week vacation and cut your costs down by 48.5% from $3,657 to $1,885 (or lower) really easily. It may not be exactly the same type of "vacation" you had originally imagined, but you would have been able to do nearly the same things for almost half the price.
Now, those savings might have helped, but if they didn’t get you to where you need to be - perhaps staying for a longer period of time OR simply choosing a similar location that is much more affordable (like Bali) could decrease your costs by another 50% or more! It should make sense that if you stay longer (as with the transportation costs above) your daily cost will decrease. In the case of Airbnb's, VRBO's, and even some hotels, you may also get discounts for staying for a full week and even higher discounts for staying for a full month. There are places in this world where your money will get you much more than it will in other places.
So, if you’re ready to make some adjustments, it's time for Step 3!
Step 3 - Budgeting
One of the biggest mistakes that most people make is either not making a budget or not sticking to it. If you spend more, you risk failing in the beginning. Trust us when we say that sticking to your budget will prevent you from having to leave your trip early and/or request funds from friends or family to help you get home.
There are many travelers that we have met that have overspent simply because they wanted to experience everything while they were in that unique spot, but they had also not budgeted for it. We have known a few travelers who started out on a travel adventure knowing they should have four months of savings but then only went with three and were already near broke by the end of the first month!
When it comes to budgeting, it is essentially the same as paying yourself an income. If you have an income stream coming in, then it is simple - you can only spend that amount. If you’re using savings or credit, then you are potentially on a dangerous path. Borrowing from your future self is going to get you into a ton of trouble.
In this step we will show you how to properly create the budget that is right for your desired lifestyle and how to allocate your funds and income stream to it to make sure you don't overspend. Additionally, we will show you how to categorize your expenses so that you can begin determining where you could squeeze in a bit more value for your money. Click the “Travel Budgeting” button to get started!
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