Mastering the finances of travel: How to save for your next trip
For some, the worst part about traveling can be the financial fears that come with it. How will I afford this vacation or extended trip? What if I go over my budget? What’s the best way to save if I don’t know how long I’ll be staying?
Dylan Pollock, COO and Financial Coach at R&D Financial Coaching in Chattanooga, Tennessee, has mastered the finances of outdoor travel through his own personal experience as a traveler — so much that he’s started his own financial coaching business for others looking to find financial freedom to live their lives the way they want.
Once you decide that you do want to travel, you need to assess your current finances to know what your options are. If your finances and travel plans aren’t lining up, you may need to adjust your lifestyle to afford your travel. How much you’re willing to sacrifice to get to where you need to be to travel is a good indication of whether the trip is worth it for you or not.
Simplify & Save
“When it comes to saving for something like this, you have to think bigger than just saving on cups of coffee at Starbucks,” says Dylan. “If this is something that’s a priority for you, then you have to ask yourself what you’re willing to do in exchange for that.”
Dylan and his wife Rebecca, who’s also a Finance and Success Coach at R&D, aren’t just keen on the financial side of weekend trips or once-a-year vacations. Together, they self-funded their “adult gap year” – a year’s worth of trips to outdoor destinations across the country – after quitting their jobs and making traveling their new lifestyle.
How did they do it? They were able to cut their rent in half by moving into a smaller home, allowing them to put more into their travel savings. “We saved a bunch of money by just moving into a smaller home because we were prioritizing our financial journey and wanting to go out and travel more,” Dylan reflects.
Your plans may not require as drastic of a change in lifestyle, but sometimes simplicity really is the key to success. Small adjustments are great, but living a simpler life in the short-term can change your ability to afford a life-changing trip.
“I’d say looking at some of those bigger expenses in life is a great way to start if you want to travel more. Start by thinking about how you can reduce those expenses — housing, transportation, food, and the like,” he states.
What to factor into your travel plans
How to continue paying your bills while you’re gone
There’s a lot that goes into the planning of an extended trip. Yes, it’s important to plan out how you will afford your travel expenses, but you also need to think about how you’ll be able to continue paying your bills while you’re away.
According to Dylan, “When you’re traveling, life is still happening when you’re gone. You have ongoing bills like your cell phone, insurance, and other fixed expenses of that nature that are still going on, so you have to make sure that you can pay for those things while you decide not to work.”
Type of travel
In addition to that, you have to ask yourself what kind of traveling you really want to do. Luxury vacation in Bora Bora, or camping in Denali? Luxury, high-end travel is going to have a different price point than living out of a tent and saving money on food by cooking outdoors every night.
Dylan shares from his experience, “If you have a tent, or if you can sleep in your car or in an RV, that’s a great way to extend your travel.” Paying $30 for a campsite versus $100 for a night in a hotel could mean weeks — even months — added on to your trip if you plan it out well. You can even camp for free in some places.
Should you take out a loan to fund your travel?
What you don’t want to do is dip into your retirement savings or take out a travel loan to afford your trip. Today, the average interest rate on a credit card is over 19%, meaning that you could easily end up paying over double the cost of your trip over the course of your loan repayment period.
If you do end up taking out a travel loan, you’ll want to create an airtight plan and a solid budget so that you’re borrowing the minimum amount that you’ll need for your trip.
Manage your cash flow and be mindful of your budget
Congrats, you’ve set your plans and finalized your travel budget. Now you can travel carefree, right? — Wrong. You should consistently be managing your cash flow while you’re away and evaluating your budget. Maintaining a dynamic plan and budget is critical.
Let’s say, for a year, you think you could live off of $20,000 and you’re traveling cheaply, then after the first two months you realize you’re spending a lot more than you anticipated. Maybe at that point you decide it’s not going to be a year, and instead it’ll only be a six-month trip.
Dylan emphasizes, “Continuing to have a healthy relationship and checking in with your finances throughout the process is really important.”
Credit card perks
Using a credit card to pay for your expenses might be the best route to go for you. If something happens while you’re away — a fraud charge or a stolen card — you’ll be a lot more secure than you would be if you were relying on paying with cash.
“I’m very pro-credit card. I would actually prefer to use my credit card while traveling than my debit card…my credit card company will go to bat for me,” Dylan says after sharing a recent experience where he noticed a mysterious charge on his credit card while he was traveling.
If you’re planning on flying a lot or eating out, you may be able to earn points on your credit card if you’re part of a frequent flyer program or earn cash back for money spent. You can even use a credit card when traveling in foreign countries to get a better exchange rate, in some cases.
If you’re traveling to a foreign country, know the exchange rates
If you really want to extend your travel, looking at places where the exchange rate is favorable to the dollar is going to be key.
“You definitely need to know the exchange rate and keep in mind how far your money is going to go for you. It’s going to go a lot further for you if you’re traveling to a country where the standard of living is a lot cheaper than America.”
In the Future
Taking the time to plan out the finances of your trip will ensure that you have the least amount of worry while you’re away. Once you’re able to implement these changes to fund your travel, you may consider doing so to save for other major expenses in the future.
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