When planning any trip, setting and sticking to a reasonable budget is key, yet it can be difficult to gauge from abroad what a reasonable budget is. On one had, you need to assess how much money you can reasonably save within your time horizon. And on the other, you need to assess whether that budget is reasonable for the places you want to go and the lifestyle you want to have there. Find real examples and do the math yourself, and don’t expect to follow your budget every day.
How we saved €20,000 in one year
There are thousands of tools to help you save money, but what actually works for you will largely depend on your character and will. We happen to naturally value experiences over ownership of things, and we both enjoy the challenge of overcoming boundaries. We don’t own a car, we live in a small apartment filled with few possessions, and we got used to living frugally while we were paying for my husband’s master’s program. So it was not a huge transition for us.
What worked for us?
- Practising a philosophy of less — it’s trendy to talk about owning less, but it was the straight-forward blunt advice of Mr. Money Mustache that really hit home for us. He and his wife managed to retire before their 31st birthdays simply by not upping their lifestyle as their incomes grew. In our lives, this meant not upgrading to a larger home (despite being pregnant with our second child), not buying a car (as many of our friends had just done), and missing two overseas weddings which I really wanted to go to (sorry Jasmine/Aaron and Maggie/JP!)
- Minimising monthly expenses — this took the most time and follow-up, but has on-going benefits for years to come. Go through your bank statements and list every monthly, quarterly and annual bill that you pay, then painstakingly research each item and see if you can get a better deal. Do it in a google spreadsheet or other cloud-service so that it’s available on all of your devices. We had 30 items on the list, and by simply shopping around we reduced our monthly spending by 11%. You can further limit your bills by going straight to the source — reduce your energy consumption, reduce your use of the car, etc.
- Opening an internet savings account — this is a separate account from your debit / credit / current account so that there is a clear divide between your trip money and your daily money. Some people have automatic transactions every month to save money, but we preferred dumping lump sums whenever money collected in our debit account. Internet savings accounts also collect higher interest rates than debit accounts and it’s really rewarding to see yourself getting closer to your goal.
Saving up is your first real commitment to your sabbatical — enjoy it.
Budget breakdown
Our first idea was that we wanted to live off €1000 per month. We wanted to use financial constraints to simplify our lives and whittle us down to the essentials only. It was a romantic idea, and absolutely possible, but the resulting lifestyle was not glamorous and would be very uncomfortable with a new baby.
Our current budget is €20,000 for six months of traveling with our family of four and has the following breakdown:
- living (per month) €2,000.00 X 6 = €12,000
- Monthly accommodation €1000.00 = roughly €30 / night
- Monthly food and entertainment €1000.00 = roughly €30 / day
- travel (all plane tickets) €6,000.00
- cushion for return €2,000.00
However, after a very expensive month in the Philippines (see below!) it became clear that we would not live to that budget. How far we exceed it will depend on what choices we make — do we go to Cambodia for 2 days costing €900 for travel alone to see Angkor Wat (a lifelong dream of mine, and pity to throw away considering how close we are)? Or do we tighten up our spending and stick to our current plan, only €280 in travel costs? This is what setting priorities means — is it more important to be disciplined and stick to our budget, or to maximise our experiences here?
Budget in action: the Philippines
I pictured clean, air conditioned, two-bedroom bungalows with some nice artistic details, and a huge veranda or small garden for the children to run freely that spilled onto the beach. This costs €140 / night in the Philippines.
The cheapest accommodation we found in the Philippines was €35 / night, and was for a small dorm room packed tightly with five bunk beds. For €40 / night we found a small room with two double beds, a noisy air conditioner and cockroaches in the bathroom. For €80 / night we had the family experience we had imagined, but no air conditioner.
Don’t ask locals for indications on how expensive things are, ask them for suggestions instead and do your own research
– How expensive is it for a family to spend a month in the Philippines?
– For €2000 / month, you can live like a king
– How about for €1000 / month?
– Like a prince
This was the advice of a Filipino friend of ours in Amsterdam, who goes back to the Philippines with his wife and toddler every year for Christmas. He seemed like an ideal person to ask — he travels at the same time of year, he understands the extra costs of traveling with children, and he has comparable lifestyle expectations to ours. But I asked the question far too vaguely.
Do you know what a hotel costs in your home town? Car rental? Food in high foot traffic areas, not your local favourites? Taxis? I left my hometown of Vancouver 15 years ago and certainly would not be able to give much of an indication if someone asked me.
As soon as we researched actual accommodation, domestic travel and food costs, it became evident that our month in the Philippines would cost closer to €5000 than the €2000 we had originally budgeted. We were surprised by how expensive the Philippines was compared to our experience in other southeast Asian countries.
We turned to online travel communities: Lonely Planet Thorn Tree and TripAdvisor. Here the general advice was unhelpful: you can live off any budget anywhere, what specifically are you asking?
Adapt and relax
You won’t really be able to test how reasonable your budget is until you start living it, and you will have periods of adjustment throughout your trip. Expect to spend more money than you expected at the beginning of your trip, less in the middle, and more at the end when a sense of urgency kicks in.
Also, we have found that we spend more money when we first enter a new country. When everything is new and confusing, it’s natural to fall back onto some expensive comforts. And it takes at least three days before you figure out what things cost in your new surroundings. Don’t feel angry or anxious about it — you can make up for these excesses later when you’re feeling more comfortable.
Setting a budget is an important process, but sticking to it is another reality. Just like in normal life, you need to be ready to adapt your expectations, make lifestyle choices every day, and have some peaks and valleys to keep it interesting.