Travelling around the world is a once in a lifetime opportunity for most of us, so if you have this opportunity looming in your life, you want to make sure it is memorable for all the right reasons. You want to make sure that you are able t experience the best parts of every country you visit, because there is little point travelling around the world if you can’t do anything when you get there.
Therefore, you need to take a holistic approach to your around the world trip finances, which should begin long before you start packing.
Saving for an Around the World Trip
Before you can budget for your spending in each destination as you travel the world, you need to have a realistic idea of what the trip is going to cost, because there is nothing more detrimental to your finances than an unrealistic budget. Many travel experts agree that US $15,000 is the amount you will need to fund an around the world trip, but before you can start saving, you need to know what your specific savings goal is.
Your travel budget may need to be significantly more than $15,000 or you may be able to get away with much less, and this will depend on:
- Where you are travelling to. For example, including Europe and the US in your around the world trip will be expensive, but travelling to India or Cambodia will be much cheaper. If you want to visit both the expensive and the cheap destinations, you can stretch your budget by spending more time in the cheaper countries, and less in the more expensive ones.
- How you travel. If you plan to take public transport then you will need to save less for your trip than if you plan to take taxis or rent a car.
- How much you travel. If you plan frequent flights on your trip then this will eat into your travel budget, because you can save by taking over land transport, or simply staying longer in each place.
- Where you stay. Of course staying in hostels on your travels will save you money from your travel budget, but remember you are sacrificing comfort and privacy.
- When you travel. Save on your travelling budget by setting off in the low season as you can negotiate significant savings on your flights, your accommodation and everything in between.
- Tours. Joining tours and recruiting travel guides will also mean you need to save more for your trip, and often you can see the same things and have the same experiences if you bought a guide book and went on your own private tour.
- Children. If you are heading off around the world on your own or with your partner then the trip will be significantly cheaper than if you were taking the kids along because there are extra airfares, accommodation costs, food expenses and different activities.
When you have looked at your trip and decided how you want to be travelling, you can start saving towards your goal amount. There are two main things you need to do when saving up for an around the world trip:
- Save with every pay check. Set up a direct debit from your transaction account every pay day, to a high interest savings account. The amount you choose will depend on how much you need to save and how much you’ve already got, but a good starting amount is 10% of your income. Of course if you have a lot to save, and you are travelling soon, you can push yourself to save even more, try 40% or 50% of each pay check. You will then need to be able to live on the rest so that your savings continue to grow, compounding their interest.
- Cut your spending. If you are putting away 50% of your pay check then you are going to need to adjust the way you live. Therefore, remember why you are saving, for example do you really need to buy that new pair of shoes, or can you wait until you’re in Italy? And what about that new iPod, why not pick up one in Singapore?
Calculate Your Travel Costs
The next step to budgeting is to create a detailed breakdown of how much your trip will cost. While you can’t plan for every expense, working out some of the most common costs will help you stay on track when you’re travelling, for example:
- Calculate an average daily spending total for every country you will visit, remembering to include the hotel, food, sightseeing costs and transport.
- Work out how many countries you want to visit and how much each leg of your journey will cost.
- Budget for the cost of visas, vaccinations and specialist equipment you need for each destination, for example snow jackets or hiking boots. This should also include health insurance and travel insurance.
Now add 10% to your total and this will give you an idea of your budget in the best case scenario. However, remember that once you get on the road there will be destinations and experiences which present themselves that you hadn’t planned for, but which you will want to take advantage of.
Access Your Money
When you’ve put in so much effort to budget for your around the world trip, you want to make sure you can easily access your money, you can avoid high transaction costs, and safely access your funds whenever you need them.
While anyone setting off overseas would once immediately turn to traveller’s cheques, they are not actually as universally accepted as they used to be. There are often high fees to cash in traveller’s cheques and you’ll have to find a retailer r merchant who accepts them. Travelling with large amounts of cash is too much of a risk to your hard-saved travel money, and using your credit card overseas will usually attract high fees too.
Therefore, the best way to access your money while travelling is to use an ATM. ATMs give you the best exchange rate and will charge minimal fees. Plus, ATMs can be found everywhere from remote towns in Africa, or the souks of the Middle East, to the Ganges in India or the rice paddies in Vietnam. You may have some trouble finding an ATM in the city of Tokyo as there are only a small number of ATMs there which will work on your network, and you need to pay attention to the network to avoid high exchange rate fees.
Also make sure that you tell your bank and credit card providers that you will be travelling, to make sure that your cards can be used overseas, and that your bank won’t cancel your card when it sees a ‘suspicious’ transaction from the other side of the world.
While you can access your money overseas from an ATM, before you leave exchange a few hundred dollars for US dollars or Euros, broken into twenties. Then keep some of this money in your money belt, and some of it in your bag as a reserve in case of an emergency.
Budget for Costs at Home
While you are travelling to leave your regular life behind, you can’t forget about it entirely because you will be leaving behind some responsibilities which you will also have to budget for to look after your home or other things you are leaving behind. Before you leave:
- Arrange for your bills to be paid electronically, or automatically so that you can either use internet banking overseas to pay your bills, or you can have amounts directly debited from your account to pay recurring bills.
- If you are renting and planning an extended trip around the world you should consider ending your lease so you’re not paying rent while you’re away. You could also consider renting out your house, and this will also save you putting your possessions in storage.
- Cancel as many bills as you can such as cable TV, the internet and utilities which you won’t need while you’re away.
- Leave your car with friends or family if you can so that it doesn’t sit idle and deteriorate while you’re gone. If you’re putting the car in storage, downgrade your insurance policy, because you’re obviously less likely to have an accident.
- Have a friend or family member collect and manage your mail, and alert you to any new bills you haven’t taken care of.
- Consider appointing a power of attorney for your bank account, so that if anything happens to you while you’re overseas, there is a friend or family member at home who can access your accounts.
Many travellers become obsessed with saving money while they are travelling. However, you can often miss out on some great experiences if you are always watching what you spend and looking for a cheap alternative, so make sure you remember to have fun on your travels.