Saving for Extended Travel: A Case Study

by Keith Savage · 19 comments

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Your plan to quit the office and travel the world might be music to your ears, but it’s sure to remain a fond dream without the one resource that keeps all of us cube grinding: money. The mother of a million sighs; the killer of a million dreams. One of my first posts on this blog questioned what are you saving your money for? At the time, Sarah and I didn’t have an answer. Now we do, and since I decided to make the leap from working someone else’s dream to working my own, money’s been on my mind a lot. Too much in fact – I agonize over even the smallest purchases, but it’s all in the name of living the dream. While we aren’t through the woods yet, I thought I’d share how we’ve been saving over the last six months. Hopefully you’ll find this useful when you start saving for extended travel or any other long-term savings goal.

Define the Scope

Be specific about the scope of your goal. Will your trip last a month? A year? Two years? What part of the world will you be visiting? Try not to let money dictate these parameters (there’s plenty of time for that later). Instead, focus on what you want to do.

I knew I wanted to give myself two years to see where Traveling Savage could go. I’m married and I don’t want to be away from Sarah for painfully long stretches, so the idea of doing one-month stints in places around the world quickly came into favor. I decided on eight one-month deployments over the span of two years. In other words, every quarter I’ll be gone for a month. This should give me enough time to travel slowly and deeply.

Set Saving Goals

Travel is an area where’s it tough to pin down exact figures, so when it comes to setting saving goals it’s all about estimation. Think about where you’re planning to visit. Does it require British Pounds or Euro currency? What’s the currency exchange rate? For example, the US Dollar exchanges favorably in Southeast Asia and poorly in the United Kingdom. Use the converted currency of your destination(s) and remember the flights. Please do not forget this: in some places the USD appears to exchange favorably in the local currency. However, the prices of goods and services are sometimes elevated to the equivalent cost back home. A hypothetical example: say one USD is worth four Argentine Pesos (ARS) and a beer back home costs $5. You might be shocked to find the beer in Argentina costs 20ARS instead of 1.25ARS. Ultimately, this means it’s not any cheaper despite the favorable exchange rate.

Our savings goals split into four accounts: one for Traveling Savage, one for Sarah’s venture (unrelated), one for emergency expenditures related to our house and vehicles, and one to cushion us in the year following my two years on the road. Luckily, we’d already been saving for years for god knows what, though not as aggressively as we could have been. We allocated our existing savings among the four accounts and reached our goals in two of them. Off the bat our savings went to Traveling Savage and I’m happy to say we hit our goal there this month. Now, we’re redirecting our savings to other account.

Build a Budget

This one’s a bitch, especially if you’re anything like Sarah and me (i.e., people who’ve never lived on a budget). Bust out the spreadsheet and divide the money into four areas:

  • Regular expenses are expenses that occur monthly and are easy to predict, such as mortgage/rent, electric, gas, cable, wireless phones, etc.
  • Irregular expenses are expenses that occur once or twice a year or are hard to predict, such as water bills, insurance, gifts, etc.
  • Discretionary spending includes necessities like groceries, gas, and household goods and entertainment (i.e., the things that keep you enjoying life).
  • Savings is the money used to make your goals a reality.

Calculate the monthly expenses and determine how you want to split discretionary spending and savings. Everyone’s different here. It all depends on how aggressive you want to be. With savings goals and a budget in hand, you should be able to identify the date when you’ll reach those goals.

Once I decided to pursue Traveling Savage full time, we tracked forward into the calendar and came up with the desired exit date from my current position. We decided right away that we needed to save aggressively, which meant identifying the bare minimum we could live on each month. One lesson learned is that you should build in a small cushion in your budget. This money shouldn’t be allocated anywhere and is there to absorb fluctuations in your monthly expenses. Breathing room – not exactitude – is needed. Part of our goal was to be able to maintain our lifestyle on Sarah’s salary alone and we’re close to making this work. This leads me to my last point.

Revisit, Reassess, Refine

Your first stab at building a budget probably won’t work. Maybe your second attempt will fail, too. Inevitably, there will be fights. We’ve had more than a couple tiffs on account of $100 Wild Birds Unlimited and Target bills (seriously, more candles?). We went into the red in each of the first five months on our budget and we’re now on version 3.0. The key to finding a workable budget has been meticulously tracking our expenses. It’s amazing (and scary) what you find. We started retaining every receipt and entering them into a spreadsheet. More recently, we starting using our online banking web site to track our budget. The site automatically categorizes expenses and allows you to enter notes on each line item – very handy.

Every three months we’ve been looking at our budget and adjusting the numbers to ensure our financial health once I take the leap. For the first time in our relationship, we’re having to say no to events and outings because we simply can’t afford it. We’re still getting used to this, but the real impact on our lifestyle has been pretty minor. The upside is the beauty of those completed goals, the feeling of satisfaction at bringing a dream into the flesh.

What saving tips do you have? How did you save for your travels?

Original photos by seriykotik1970, ubookworm, kidgrifter, and eric731, respectively, via Flickr under Creative Commons

rickNo Gravatar August 5, 2010 at 9:42 AM

I have to agree with Erin, I find the easiest way to save is simply to stop buying stuff apart from the bare essentials. If you really want to save you have to live pretty much like a complete hermit. Stop all the unnecessary expenditure and going out and you’ll soon find the money will start racking up. It can be a bit boring, but just think of the big picture and all the good times you will have when you’re away.

Keith SavageNo Gravatar August 5, 2010 at 11:00 AM

Agreed, and that’s pretty much what we’re doing, though we’re allowing some money to be spent on “fun” things to avoid a completely ascetic lifestyle. So far we’ve saved close to $50k this year alone.

EmilyNo Gravatar June 30, 2010 at 12:56 PM

Good stuff! It really is hard finding the discipline to save significant amounts. One of my tricks is that I have an interest-earning online savings account for travel at a bank other than my regular bank. I have an automatic savings plan set up, so every week, a certain amount goes from my regular checking account to my savings account at the other bank. It’s a small enough amount that I don’t really notice it, but not large enough to cause me to overdraft. Because they are at two separate banks, it takes several days for the money to transfer–this means I can’t impulsively transfer it to my checking and spend it! It’s my favorite saving method thus far.

Keith SavageNo Gravatar August 5, 2010 at 11:02 AM

Nice, I like that plan. Any time you can automate saving increases your chance of hitting your goals. You start getting problems when you leave money languishing in your checking account just waiting to be spent.

ErinNo Gravatar June 26, 2010 at 5:45 PM

Great tips here. We got really good at saving, especially after we returned from our 1 year RTW trip and saved again for 9 months to leave on our current “never ending voyage”. It was much easier to save once we knew how amazing travelling was.

My biggest advice is just stop buying stuff – completely (beyond essentials like food etc). We now hate shopping and find it hard to buy anything, even when we need it (like warm clothes for Bolivia). It gets easier over time so just keep at it and continually reassess the budget – is there anywhere else you can cut down on? It becomes really suprising how little you can live on.

We wrote about how we saved 75% of our income here:

Keith SavageNo Gravatar June 28, 2010 at 4:34 PM

You guys rock! That’s some serious dedication. We can get to 50% savings, but then we run into mortgage and bills. Our story is slightly different, too, since I’ll be traveling solo.

SuzyNo Gravatar June 26, 2010 at 11:14 AM

Great information Keith. I am so bad at saving so these are good tips to keep in mind. For my three month travels this summer, I basically saved for just 6 months. I am also working as I travel this summer so that helps out the travel fund department. Before my trip, I cut back on little things, shopping, etc. That helped a lot. I think keeping track of your spending in a spreadsheet also make the process easier. It is always better to save more than you think. I have found in Italy there are expenses I didn’t think of before leaving, but I have a little bit of cushion.

Keith SavageNo Gravatar June 28, 2010 at 4:18 PM

Cushion is critical. I find that I’m having a hard time saving for the style of travel I’ll be doing since I haven’t even chosen my destinations yet. I may need to balance cheaper destinations against the more expensive ones.

Financial SamuraiNo Gravatar June 26, 2010 at 10:47 AM

Keith – Thanks for sharing your thoughts. This is a question I wonder A LOT with traveling bloggers since I’m a personal finance blogger.

What about retirement savings though? Are you able to build upon that? I’ve built upon the concept of a Yakezie Lifestyle, which is one of the three main verticals in the upcoming site. The idea is to live the life you want if you’ve mastered Yakezie Personal Finance.

We’d welcome your contribution and insights when the site is launched!


Yakezie Lifestyle

Keith SavageNo Gravatar June 26, 2010 at 11:03 AM

Retirement is a good question. If you don’t believe in working at something you dislike until a defined point of retirement, what’s the point of retirement savings? In other words, if you do something you love, why wouldn’t you do it for the rest of your life? I can see the benefit of retirement savings as a cushion, but my mind seems to drifting away from what feels like an old idea (retirement).

That said, it’s unlikely I’ll be able to put money into a retirement savings account at the start. I do have a nice 401k from my current job that we’ll transfer. I’m not familiar with the Yakezie personal finance system.

Financial SamuraiNo Gravatar June 26, 2010 at 11:10 AM

I definitely encourage you to start thinking about a financial safety net. It’s easy to do anything and do everything younger, and eventually you’ll have to start thinking the other route.

The secret really is to do what you love forever and never stop retiring. I’m just hear to let you know that the things you love to do will change over your life time.

You’ll find out more about The Yakezie soon!



WanderingTraderNo Gravatar June 25, 2010 at 6:02 PM

Great article, one of the reasons I decided to live abroad is because its actually cheaper, this in turn allows you to save and continue to more expensive places like Europe. Im in Toronto at the moment enjoying Canada and plan enjoying the low cost South America Adventure

Keith SavageNo Gravatar June 26, 2010 at 9:41 AM

That’s a good idea, especially when you apply some geoarbitrage principles (i.e., live on Pesos and get paid in Pounds). I don’t have that freedom in my situation. My wife has a job and we have a house, so we have to make it work while straddling the two extremes of living the template vs. selling all and traveling full time.

WanderingTraderNo Gravatar June 28, 2010 at 10:22 PM

I am a firm believer in that people always make time for whats important to them. No matter what it is, if its important to you someone will always get it done. Very inspiring.. hopefully we can meet up in Buenos Aires

Keith SavageNo Gravatar June 29, 2010 at 1:11 PM

Absolutely. It would be nice to connect in Bs As.

GlobetrooperToddNo Gravatar June 25, 2010 at 2:52 PM

This is a topic pretty close to Lauren and I. Both of us left professional jobs within a couple of months of each other, which = time to reassess spending habits.

My only additional tip is to look at each expenditure item and work out if you’ll generally be less happy if you didn’t have each item. We sold a lot of stuff when we thought this way. And ironically, we were happier for it. You hear a lot of hype about the “minimalist” movement, but sometimes hype is generated for good reason.

When you have no car, no microwave, a tiny apartment (albeit in a gorgeous inspiring area), only clothes to fit into a carry-on bag, not even an electric kettle… strange things happen. You talk more, discuss new ideas constantly, eat properly, get fit, meet interesting people, oh, and save an absolute shedload of money.

Great post Keith.

Keith SavageNo Gravatar June 26, 2010 at 9:48 AM

I agree with the benefits of a minimalist lifestyle, and it’s great that you and Lauren are on the same page with this. However, since I’ll be traveling on my own, it doesn’t quite work for us to strip out our possessions since Sarah will working as usual. It’s a difficult chasm to bridge because we need to maintain this delicate balance of living in two worlds. I know our budgeting will continue to evolve as we proceed through the next six months.

Thanks for the thoughtful comment!

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