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How to Create a Travel Budget

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8 Easy Steps to Creating and Keeping a Travel Budget

Want to travel the world by van and do not know where to start? Are you wondering how much does it cost to van life? Or maybe, you just want to travel for an extended period of time? This is where I come in and help you understand how to create a travel budget and how you too can afford to travel by van!

Traveling for an extended period of time is a luxury that is not afforded to most people, but is one that is easily attainable. That is, if the person truly wants to do it. The first question we often get from people is “How do you afford it?”.

After living on the road for over two years, I can honestly tell you that it does not cost a fortune to be able to travel long-term! In fact, we spend less than $350 per week (USD) for our living expenses (not total expenses) and that is the total amount FOR TWO PEOPLE! On a per month basis, this is less than my rent alone living in Amsterdam.  The main reason why we are able to keep our expenses affordable is a budget. While we do work, the easiest and best way to monitor and track your expenses is to create a budget and stick to it. 

Having traveled on several occasions for extended periods of time, I have realized the most important aspect is creating a solid budget and sticking to it (which is the hardest part). Yes, saving in advance to fund your trip is super important and may mean you cut back on things in the present, but traveling the world by van or by any means is 100% worth it.

My goal is to help you learn how to create a travel budget and stick to it during your travels, so that you can continue to travel and pursue your dreams. While my goal is to help long term travelers particularly those of you embarking on the phenomenon of “van life”, creating a budget is important and helpful for all types of travel. 

1. Decide where to go

This may seem like a silly starting point for how to create a travel budget, but trust me it is not. Knowing where you want to go is obvious as the cost of countries varies immensely. If you have a budget that is the same regardless of where you are going, you can change your spending habits to match. Instead of staying in a hostel, you can pamper yourself at a nice hotel. But knowing where you are going is the first step to creating a solid budget. 

2. Determine the number of weeks away

The number of weeks you will be gone impacts the amount of money to be spent. If you have a set amount of money to spend and you plan to be gone for four weeks, the amount of money you can spend each weeks can be vastly different than if you were going away for a year. 

3. Set aside money for the necessities

With the place and length of vacation set, it is time to start allocating funds. The first step is to set money aside for the “boring” things. We are talking about flights, travel insurance, visas and other things that are required to be purchased before you even leave to start your trip. While less exciting, they are essential and imperative for a successful vacation (and budget).

If you are overlanding, do not forget to include maintenance and car insurance. These costs can sneak up on you if you aren’t careful!

Example car related necessities
Example travel related necessities

4.  Define the must sees and dos

Before we start each trip, we determine what are the must sees and dos in the area in which we are going. We call these our “discretionary costs”. These are the things that we absolutely have to do while on vacation. For example, if we know we want to go scuba diving in the Philippines, we need to go ahead and set this money aside in the budget. This will determine how much money we have for what we call our “living expenses”.  We do the research on prices for these items and determine how much these experiences will cost (and then add 10% for inflation). This is the first step in defining a budget. 

Example of discretionary costs

5. Find out how much it costs to live

This is the hardest part of making a budget. Finding out how much it costs to live in the particular destination(s) you have chosen. To determine how much things are, I look at a combination of travel bloggers, the cost of living guides from International Living, hotel booking sites and travel/food websites. While not always completely accurate, these resources are a good guide to figure out how much say a beer will cost in the grocery store and in the bar. If we know a beer costs $1 at the grocery store, but $3.50 out this could impact how we spend our time and money.

6. Determine your spending habits 

Now that we know where we are going, what we must see and do, and how much things are going to cost, we need to determine our spending habits. That is:

  • Will we stay in a hotel, a hostel or in a van?
  • Will we cook our own meals? If so, what meals and how often?
  • Will we go out and drink alcohol?
  • And many more….

This will greatly impact your budget and is not something that you can glean from other travel blogs. For example, in Mexico, we eat out for most lunches and cook for dinner. This was impacted by the cost of lunch which was typically between USD $1 – $2 per person compared to lunches in Chile which were USD $4 – $5 per person. 

7. Make your budget 

We now have all the tools to make a budget. Start at the top with the necessities like food and accommodation and budget how much these will cost you. We go as far as splitting it out between groceries versus eating out and bar vs. non-bar spending. After setting what we think we will spend, we take another look at the budget. In our first budget, we typically allocate far too much money (money that we do not have) to items. For example, in creating our Mexico budget, we allocated $50 per week to eating out, but then after further inspection realized this could really be $40 per week (2 persons x 7 days x USD $2 per person) with a little extra to spare. 

Make sure when creating your budget you do not forget about things like toiletries, mobile internet, tolls and parking fees and more. These cost while usually fairly inexpensive (unless you are taking only toll roads in Central and South America) can add up over time. 

These are the categories that we have found work best for us:

  • Groceries
  • Eating out
  • Coffee (internet usage in a cafe)
  • Bar money (alcohol consumed with meals or at a bar)
  • Alcohol fund (beer, wine and spirits outside of an establishment)
  • Gas
  • Other transportation (taxi, tolls and parking)
  • Activities (daily things like visiting a museum)
  • Mobile phone charges (data and call/text)
  • Other (toiletries, donations, etc.).

While these work for us, they may not work for you. Figure out where you spend most of your money and define a category to capture these general expenses. 

Example of a budget for living expenses
Example of living expenses

8. Stick to your budget

The only way a budget will work is if you stick to it. Making the budget is the easy part, but sticking to it can be difficult. While we do not always come in budget for each category, we aim to come within budget each week.

We keep track of the money we spend each day on our phone and include it in our tracker each evening. This makes us think about each dollar that we are spending and allows us the opportunity to travel for extended periods of time. 

This does not mean that we do not enjoy the fancier things in life or deprive ourselves of things we love. It just means we are more conscious of the things we are spending our money on. 

Hopefully these simple eight tips will help you to create and stick to a budget in preparation for your upcoming travels!

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