How to Make (and stick to) a Travel Budget

My husband and I recently changed our vacation plans.  Why?  Because airline tickets to Indonesia went up in price – and because the ticket price advertised by the airline didn’t include tax and fuel surcharges.  Basically, the price of tickets to Indonesia was a lot more expensive than we expected.  To put it simply, going to Indonesia was out of our budget.

We budget our money – not because we are poor or because we like rules or because we dislike fun.  We budget because we care about certain things.  For example, we care about planning well for the future, and we care about giving to others.  In order to make sure both of those things happen, we budget.

For us, this means deciding beforehand how we want to use our money.  We set money aside each month to go towards different categories – groceries, transportation, etc.  One of those categories is vacation.  When it comes time to plan our vacation, we look at how much money we have saved in the “vacation” category, and we plan a vacation that fits the amount saved.  It’s that simple.  Because our Indonesia plans exceeded the amount saved, we changed our plans.

To be honest, we have the money to travel to Indonesia.  We could easily skimp on another category or take some money from our savings or not give away as much.  But this is exactly why we pre-decide how to use our money.  It is too easy, in the excitement of the moment, to decide to blow money on the here-and-now and not consider how it will affect you (or others) in the future.  Because we know our own tendency to spend money selfishly and irresponsibly, we choose to set a budget so that we will be sure to take good care of our family and have the freedom to give generously to others.

We are big fans of budgets.  Sure, it might mean changing some plans here and there.  But in the end, it saves us a lot of headaches…because it means we spend money that we have.  It also means that we spend money in a way that matches our values.  One thing I love about our budget is that it lets me spend money guilt-free.  I don’t have to feel guilty when I go buy myself some new clothes because I know we have designated that money for my clothes.  It is money set aside for that very purpose, and I know that it is not subtracting from money we give charitably.  I don’t have to worry that – oops – I don’t have any money this month to give to the child we sponsor through Compassion International.  It is all part of our monthly budget system.

That’s why we stick to our budget.  It might seem like we are really confined and not free to do what we want with our money.  But in actually, budgeting helps us do exactly what we want with our money.

So, that’s why we stick to our budget.  Now, here is how to make a budget.  It’s really very simple:

1. Sit down with a friend, spouse, or trusted confidant and talk through what is most important to you.  Talk about the things you really want your money to go towards and make a list.
• Eating at fancy restaurants? Traveling abroad? Buying art? Outdoor sports? Charitable giving? A future business endeavor? Saving for retirement?
• Don’t feel guilty about the things that are important to you.  There’s really no “wrong” answers here.
2. Write down your exact (post-tax) monthly income.
3. Write down all monthly “necessity” expenses
• Rent, utilities, transportation, cleaning supplies, groceries, diapers
• If you don’t know exactly how much you spend on each of these areas, estimate and set that as your budgeted amount.  You can tweak it later.
4. Subtract the sum of your necessity expenses from your monthly income
5. The remainder is what you have to put towards those things you decide are important to you.  Some really smart people out there have lots of suggestions on the types of things that might be important to consider putting money towards (see: Dave Ramsey).  Of course, it is a great idea to save for retirement, consider investing, and have emergency savings.  My husband and I do all of those things.  But look back at your list of values, first.  What is important to you?  It’s your decision how you want to use your money.
• Here are a few categories from our budget:
• Charitable giving
• Outdoor activities and weekend trips
• Holidays
• Gifts for family
• Gifts for friends
• Business
• Vacation
• 5^th anniversary trip on the Trans-Siberian Railroad (we’ve been saving for this since our first year of marriage and are now half-way to our 5^th anniversary)
6. Decide how much money you want to put towards each category each month.  In our budget, certain categories only get about $5/month.  But it is something.  And over time, that amount builds up.  The point is not immediate gratification but saving well for the things that are really important to you.
7. Find accountability, evaluate, and adjust – this is perhaps the most important part of the whole system.  Before I got married, I tried to budget but would usually get way off track.  I would cheat because I was the only one who knew my budget.    Now that I am married, I scrupulously follow our budget.  It’s not that I fear my husband being angry with me if I break the budget.  It’s just that we, together, have agreed how we want to spend our money.  If I spend money in a way that is totally contrary to our agreement, my husband will know.  The presence of accountability helps me stick to the plan.  If you are single, I strongly encourage you to find a friend who can hold you accountable to you goals.

So, this post is about making a travel budget, but it’s impossible for me to write about making a travel budget without talking about making a budget in general.  Having a travel budget is useless if you don’t know how much you have to spend in the first place.  I suggest making “vacation” one of the categories to which you put money aside each month. When it is time to plan your vacation, look at how much you have saved for vacation and plan accordingly.  As you make your travel budget, follow a similar process as described above.

Here are some other things, more specifically related to travel, to consider as you plan your vacation:

• How much will transportation cost?  Don’t forget that you will have transportation costs to get to a location and after you arrive at that location.  Here is an excellent article on  How to Find the Best Flights and Cheapest Fares.
• How much will housing cost?
• How much will food cost?
• What types of activities do you want to do once you arrive? How much will those activities cost?
• Make trade-offs between these different categories to fit what you want to do.  For example, if you really like staying in nice hotels, travel somewhere closer to home so that your transportation cost will be lower.  If you really want to do some elaborate activities once you arrive (like sky-diving or swimming with dolphins or something), consider staying in a cheaper hotel or hostel.

Finally, consider using a free online tool like Budget Your Trip.  It is free and comes recommended by fellow blogger and traveler Justin of  The Great Family Escape.

Once again, the key here is to plan ahead.  Take a look at how much money you have and then think through what the different costs will be.  Make a plan and stick to it!  You don’t want to be paying this vacation off for the next 5 years.