A friend of ours who’s thinking about taking a leap year of his own recently asked us, “Any words of wisdom on how to get started on budgeting?”
Yes! Setting a budget for a leap year, career break, gap year — whatever you want to call it — can at first feel like a steep climb, but it’s easy when you take it piece by piece. So for today’s #TravelTipTuesday, here’s how we did it:
/ STEP 1: Use your imagination /
How will you spend your time on most days? Will you make food at home? Go to a coffee shop once a day? Lay on the beach? Go to yoga classes? Volunteer? Write? Every day won’t be the same, of course, but try to get a sense of what an average day will look like.
Then, think about special days (or weeks). Do you want to rent a car for a day trip every couple weeks? Are you joining an organized tour to the Galapagos? Will you take language classes for a month?
The purpose of this exercise is to get you thinking about what you’ll do so you have a realistic sense of what it will require financially. Don’t worry, you don’t need to think of everything (and you won’t, trust me), but you do need a general idea.
/ STEP 2: Give your imagination some numbers /
Next, do a little research and/or make some educated guesses about what it will cost to do those things. For example, search online for hostels/rentals in cities you want to visit. Activities like reading are free, but books aren’t (unless you can borrow library ebooks).
Start populating a budget spreadsheet with your income and expenses, along with a notes column to remind yourself what’s included in each line. Our budget had the following line items, which we created monthly estimates for.
- Condo rental
- Freelance and side projects
- Allowance from savings
- Condo, including mortgage, property manager and insurance
- Student loan payments
- Credit card fees (our credit cards have great travel rewards, but come with an annual fee)
- Cell phones (it was cheaper to suspend our phone numbers than cancel our contracts)
- Airfare and long-distance buses (varies by how often you move from place to place)
- Food, both groceries and restaurants
- Travel insurance, which includes major medical, theft protection and more
- Local transportation, including taxis, car rentals and bus fare
- Activities (this is the “fun stuff” category, like classes, museums and kayak rentals)
- Dog care, including vet visits and food
- Miscellaneous expenses, like toiletries, replacement clothing or SIM cards
- Bank fees (you shouldn’t have any if you use an ATM card that reimburses fees and a credit card without foreign transaction fees)
You will find that your biggest expenses are housing and food. (And perhaps airfare/buses if you’re moving around a lot.) Finding accommodations with at least a partial kitchen will help tremendously; one order of yogurt and granola at a cafe is the same price as a week’s worth from the grocery store.
Aside from replacement toiletries or socks, you won’t buy much “stuff” on the road. But you may pay a lot for activities. Chris and I’s idea of a good time is going to new restaurants. That’s why Step 1 is so important. For example, one traveler we met would join yoga studios, so that was a monthly expense for him.
/ STEP 3: Find a tracking method that works /
While you’re on the road, you’re probably not going to track all of your receipts — especially since you’ll likely be paying cash a lot. One traveler would write down everything he spent to track where his money was going and make adjustments as needed. We did that in the beginning, but we didn’t last long!
We like to use Mint to track our spending, because it aggregates income and expenses across all our accounts, from the credit card charge for bus tickets to the cash we take out of the ATM. It also allows you to post-date transactions, so if you paid for something in March that you’ll do in April, it won’t screw up your totals.
What matters most is watching the bottom line. Besides, your budget is meant to be flexible. Spending more on food and activities this month? Find cheaper accommodations. Under budget on miscellaneous expenses? Splurge at some restaurants. Spending less than you budgeted? Extend your trip!!!
Hope this is a useful resource for getting started, and let us know in the comments if you have any questions.
And last, but certainly not least, HAPPY BIRTHDAY to my mom. I love you!