How to Create a Travel Budget for Any Trip
Planning and creating a realistic travel budget that actually works in real life can be challenging. In this guide, we'll share our tips to make an excellent and balanced travel budget for all your short vacations or long term trips.
No matter the length and purpose of your trip, whether it's a backpacking trip around Colombia or cruising the Galapagos Islands, you should make a travel budget. Basically, it's a spending plan that keeps your expenses or even expectations in check.
However, making a good working travel budget can be difficult.
There are many things to consider. You might have millions of questions such as where to even begin, what will be your total travel costs, what expenses to track, when to start planning, or what you can afford.
As with everything in life, breaking the process down into several steps will make your planning efforts much easier.
There are many ways to have a better vacation. And creating a realistic travel budget is one of them, together with a good travel itinerary.
Knowing exactly how much money you can spend every day while traveling will give you peace to your mind. And having a stress-free vacation is always a good idea.
So here's everything you need to know about making a travel budget.
WHY PLAN A TRAVEL BUDGET
Unless you are a millionaire, traveling without a fixed travel budget is not very smart. It can create a lot of potential problems and travel mistakes that can ruin your trip.
The issues that arise from overspending or not having enough money are something you don't want to deal with on your vacation.
It can also cause a lot of stress and disputes between partners, friends or members of a family, as everyone will have a different opinion on the spending.
Budgeting your costs before your trip is a smart thing to do, and while it requires some effort, it's not that difficult if you know how to make one.
In fact, there is only one simple rule. Always make sure your travel budget is realistic. There is nothing worse than making a budget that won't work in the real world.
Honestly, the more effort you put into the planning part, the better you will be prepared for unexpected events.
You can start planning your travel budget pretty much any time before the trip. Just don't leave it for the last second, as there are many things you need to arrange before you travel.
THE LENGTH OF YOUR TRIP
How long will you be traveling? That's the essential question you should ask yourself every time you start planning your vacation budget. Your entire budget depends on the total amount of days you spend on the road.
Let's say you want to spend three days in Yellowstone National Park, two weeks in Costa Rica, or four weeks in New Zealand. Your final budget will look completely different.
Long term travel requires an even more careful approach as it's much harder to plan the whole thing in general. Knowing exactly how many days you will stay abroad is crucial.
Will you travel for a year, six months, or just travel until you run out of money?
We made a helpful guide on long term traveling you should definitely check out.
Either way, the number of days you spend on the road will determine how much money you will need for your adventure.
ESTIMATE TRAVEL COSTS
So every time we start planning a trip, we sit down together and write down all our estimated travel expenses on a piece of paper.
How do we find out how much things cost in a given destination? For accommodation, we search for prices ourselves, as they fluctuate depending on the time of the year.
If you already planned your travel itinerary, then you already know what places you will visit.
Let's say we want to travel around central European cities such as Berlin, Prague, or Vienna, so we go on Booking.com or Hostelworld and search for prices in a given destination.
Then we google the prices of food, meals in restaurants, entrance fees, or transportation. We never forget to include even basic expenses such as travel insurance or visas.
Lastly, we can't fail to include flight tickets, as they are usually quite expensive and will eat up a lot of your total budget.
When we have all the information we need, we calculate the final sum.
First, we multiply the total amount of days by accommodation, food, and transportation, as these are the essentials that need to be covered every day.
Then we add the rest of the expenses, such as entrance fees, tours, or rentals. Now is the time to compare the final sum of money with what we can afford to spend. This leads us to another question.
HOW MUCH YOU CAN SPEND
Before you start planning, you need to ask yourself honestly important questions such as how much money you have available for your vacation, what you can afford, and how much money you are willing to spend.
These three questions might seem similar to you, but believe us, they are not the same.
Just because you have allocated $3000 for your trip around Iceland doesn't mean you have to spend them all.
What we usually do instead is that we make three budget versions. For this case, we will use these three thousand dollars.
The first version of the budget will work with $2000. It's the most optimistic one and often not even possible to achieve unless you cut your travel expenses to a minimum or find super cheap flight tickets.
It would work only in case we wouldn't spend much on extras, the prices wouldn't be higher than we found during our research, and nothing unexpected happened.
The second version would be $2500. That would be our goal.
It's the perfect balance between having an overly tight budget and spending too much. It would also make our trip stress-free as we wouldn't have to worry about every cent we spend.
The last one would be $3000. It's the version that takes into account some unexpected expenses or some bigger mistakes in our initial estimations.
Most importantly, it's still the sum of money we can afford, so nothing happens if we use all of the money on the road.
Remember, your travel budget calculation should always be based on how much you can afford without going into debt.
Traveling is not a standard, and while it might be tempting to borrow money to fulfill your travel dreams, it's always a bad idea. Make sure to read our guide on how to save money for travel.
On top of that, you should always have emergency money that is not included in this budget.
BUDGET ADJUSTMENTS
So what happens when your estimated travel budget is higher than what you can actually afford. It happened to us on more than one occasion.
When we started planning our Canadian Rockies trip, we realized that a combination of a rental car and hotel rooms would be out of our budget limit. So we opted for a campervan and staying at the campgrounds.
As hinted in the advice above, you have a few options on how to proceed from here.
Firstly, you can take a deeper look into each category and try to lower your expenses. So let's say that we want to travel across Europe and stay in private rooms with shared bathrooms.
But even private rooms in hostels are expensive, and prices around $50 per room are common depending on the country.
So by staying in this type of room, we would spend half of our daily budget just on accommodation. So we would look into dormitories that can be found for $15 per bunk bed. As a couple, we would instantly save $20 a day.
But you might not be the biggest fan of hostel life or dormitories, so you need to look into another category if there's a way how to cut costs.
The entrance fees to museums, castles, or other landmarks are pretty steep, so there is always room to lower the expenses in this area.
So, for example, if you want to visit the beautiful capital of our home country, you should search for free things to do in Prague.
Some travelers can admire the beautiful architecture of European cities from outside; some can stay in dormitories, while others don't need to go on a tour.
So once again, there is always room for improvement, and you can always find a way to lower your spending.
In the most extreme case, you can visit a cheaper country.
That's how we ended up hiking the Annapurna Circuit instead of going to Barcelona. But that's probably a too extreme solution for most.
If you are dealing with the opposite issue, that your estimated travel budget is lower than what you can afford, you can follow a similar approach.
You can stay in nicer accommodations, include more tours, or spend more money on eating out.
Being said that, you don't have to spend that money if you are comfortable with your travel plans. In fact, we would save them for some future trips, but that's just us.
DAILY BUDGET
Now that we know how many days we will spend on the road, we can calculate our daily budget. We already established that we want to spend fourteen days in Europe.
Now it's just simple math. You divide the final sum by the number of days. In this case, it's 3000/14.
Therefore, our daily maximum budget is $214. As we travel as a couple, we can further divide the result by two, so we end up with $112 per person per day.
In our case, it's not needed as we share our travel expenses, but some couples might want to split their cost of travel.
Traveling on roughly $100 per person per day in Europe is definitely doable, but don't expect a high standard.
A lot of cities are known for very expensive accommodation, food, or entrance fees, and the trip can get expensive, depending on your travel style.
On the other hand, traveling around Southeast Asia or South America on $100 will get you a far more comfortable travel standard.
Don't forget to check out our backpacker's guide on traveling the world on $50 a day, where you can find more useful tips and advice from all those years we spent on the road.
When it comes to daily budget, always derive from what you can afford. This rule is very straightforward and easy to grasp.
It helps ensure you don't spend money you don't have.
BASIC TRAVEL EXPENSES
Accommodation, food, and transportation are among the basic expenses that you need to factor into your daily travel budget.
Let's say you will travel on $100 a day.
When you spend $30 on a hotel room, $20 on a bus, and $25 on food, you used up more than two-thirds of your entire travel budget.
Now you are left with only $25 for a day. From this money, you need to pay the rest of your travel expenses, such as entrance fees, tours, etc.
Basic travel expenses will almost always eat up most of your travel budget. When we traveled around Peru, it was such a diverse trip that we had to create several sub-categories to make it clearer.
Even the main categories can be further divided into several sub-categories.
Food can be split into groceries, eating out, or even drinks. Similarly, you can have buses, trains, taxis, or planes sub-categories in the main transport category.
THINGS YOU NEED TO FACTOR IN
We are still using the example of a 2-week trip around Europe on a $100. You might think that this amount of money should be enough to have a somewhat comfortable trip.
But what if you factor in all your travel expenses in the final budget?
Let's say you bought round-trip flight tickets for $500. Just the flight tickets only will take up $35 dollars (500/14) of your daily budget, so now you are left with only $65 per day. And that's just the flight ticket.
Now add travel insurance, vaccination, the gear you buy for the trip, etc.
So what will you do? You can increase your travel budget, you can find a way to lower the expenses even more, or you can create a special category that will include things you purchase before traveling.
The important thing is to take all this into account.
We believe it's crucial to work with your total budget containing all your travel expenses rather than an incomplete one to avoid any unpleasant surprises.
ACCOMMODATION
Regardless of your destination, you need to stay somewhere every night. Nowadays, there are many types of accommodation for different budgets, so everyone can choose what's best for them.
Being said that, you should always stay within your budget no matter how tempting the more expensive room looks.
Sure, staying in Four Seasons in Prague in a luxury room with the view of Prague Castle towering above the Vltava River is priceless, but a budget room in a good hostel will work as well.
Choosing the best accommodation is not difficult if you are familiar with the basics, which will help you find a decent room for a good price.
Accommodation is often among the biggest expenses of every vacation and usually leaves a greater room for maneuvering.
It can quickly eat up a large portion of your budget, so it's important to keep it in the bay.
FOOD
Obviously, food is also among basic travel expenses. Regardless of whether you prepare your own meal, have meals in a local eatery, or enjoy dining in fancy restaurants, you need to have at least three meals every day.
Some destinations such as Malaysia or Nicaragua offer a good value for meals in restaurants, while in some it's better to cook meals yourself.
Estimating your food expenses is quite difficult as you never know how your days will look like.
Every day is different on the road, and even though you planned at home to buy ingredients and prepare meals in the hostel kitchen every day, the reality might have different plans for you.
When reserving a room, look for accommodation that comes with included breakfast; it's often very convenient, so you don't need to worry about finding something to eat early in the morning.
To lower your food budget, preparing your own meals will save you a lot of money in expensive destinations.
TRANSPORT
Getting from point A to B is the daily bread of every traveler. For larger distances, you can either opt for a plane, bus or train. The shorter distance you can cover on a bike or foot.
Even when you don't need to travel between destinations, you still probably spend some money on public transport or taxis.
A category on its own is road trips, where you usually don't need to use other types of transport.
Rental cars search engines make your planning convenient, as you can get a quote even without the reservation. Therefore, you can quite accurately predict what will be your final bill for the rental car.
When booking the car, make sure that car insurance is included; otherwise, you will pay extra for it.
Some countries are huge, and while buses or trains are cheaper, they can use up a lot of time from your vacation.
If you have less than two weeks in Brazil or three weeks in Mexico, then you might want to consider taking a domestic flight or two to save some time at the expense of your budget.
EXTRA TRAVEL EXPENSES
You can consider everything else beyond these three essential travel expenses as extra expenses.
We call the next items on your budget list 'extras' because not every time you need to spend money on them.
When we travel locally, we don't need to buy flight tickets or extra travel insurance (as our taxes cover it).
However, we still almost always need to pay entrance fees or tours.
Therefore, you will need to include many of these extra categories in your travel budget.
ENTRANCE FEES
If you've planned a cultural escape into one of the European cities such as London or Rome, entrance fees will use up a significant portion of your budget.
And if you ever go to New York, then entrance fees to the Empire State Building or Top of The Rock are one of the highest in the world.
But even an outdoor trip into the heart of the Canadian Rockies or Torres del Paine will not be free.
Entrance prices around the world differ significantly, so make sure to have enough money for it.
If you are a budget traveler, you might want to visit museums and attractions offering free entrance.
TOURS
Another thing you need to include in your travel budget is the cost of guided tours. Even though we prefer to visit most places individually, sometimes it makes more sense to join a tour.
There are also many activities that can be done only with a guided tour, such as hiking the Inca Trail.
Luckily, estimating how much money you will spend on tours and entrance fees can be quite accurately calculated at home. All major tourist attractions have ticket prices displayed on their sites.
Similarly, it won't take much time to search for tour prices online.
When you regularly join guided tours, you are pretty familiar with the tipping habits.
Sure, a short city tour in Medellin or Rio de Janeiro will require a much smaller tip than a 6-day Salkantay Trek in the Peruvian Andes, but the point remains the same.
Whenever you know that you will take several tours, be prepared to have enough money for the tips.
You can consider it as an introduction to hidden travel costs, which we'll talk about more later in this blog post.
TRAVEL INSURANCE
One of the most important expenses you need to always include in your budget is travel insurance.
It baffles us every time we hear that someone travels without travel insurance. The high expenses in case something goes wrong are just not worth taking the risk.
Good travel insurance covers not only your medical bills but also stolen things, lost luggage, or flight cancelations.
We never leave home without travel insurance that was designed to cover our expenses if something goes wrong during the trip.
World Nomads provides travel insurance for travelers to cover their trip essentials, including sports and adventure activities.
SafetyWing is affordable travel insurance for backpackers, long-term travelers, and digital nomads.
Travel smarter and safer!
FLIGHT TICKETS
Finding cheap flight tickets is often not easy. Nevertheless, flying is an integral part of traveling, and it's often the fastest and most comfortable way to get to the starting or ending point of your adventure.
Furthermore, domestic flights offer a speedier alternative to land transport in big countries such as Argentina or Philippines.
Don't forget to include this expense in your travel budget. We know some people who don't include them in their final budget, but we believe that's not the best decision.
Paying $500 or even $1000 for flight tickets is a lot of money, and we believe that this expense shouldn't be left out of any travel budget.
When we flew to Nepal to hike the Annapurna Circuit, the flight tickets were more expensive than what we spent on everything else. So leaving this item out of the budget wouldn't make any sense.
As a result, it will make monitoring of your overall spending far more transparent, and you will clearly see all your expenses.
HIDDEN TRAVEL EXPENSES
Hidden and unplanned expenses are more than often a thing travelers do not factor into the budget. There are plenty of hidden costs of travel such as ATM fees, hotel parking, or street parking fees.
Meals and drinks on the plane and at the airport cost a lot of money, and then you have destinations fees or cancellation fees.
We found them as the most annoying ones, especially on long term trips, as they can quickly add up to your final budget and what's even worse they can take you by surprise.
It's quite irritating to find during your road trip that the hotels charge $10-$20 for parking (that's why you should do your research before you go) or that they charge extra for your four-legged furry friend.
Or that street parking is even more expensive than you would have thought.
When you are putting together your travel budget, make sure to have some extra budget for this type of expenses.
On top of that, one of the best travel tips we can share with you is to always carry some emergency cash in case something goes wrong on your trip.
Having anything from $100 to $200 with you can save you a neck in many precarious situations.
A slightly better alternative is to keep $100 with you and $100 in your hotel room.
You can use the moneybelt that helps you stash money safely, but most importantly, the cash will be out of your sight, and you won't be tempted to use it.
And never ever use them unless it's an emergency.
BUDGET PLANNING RESOURCES
If you are traveling a lot, you can even create your own travel budget template that you can use every time you go abroad to make the planning part easier.
You can even use some travel budget apps or some online travel budget calculators, but it's not needed, as you can calculate your expenses by yourself.
We usually use either an excel spreadsheet or good old pen and paper. For some reason, it works for us the best. We make multiple versions and make many changes during the process.
Being able to see all your expenses estimations on paper makes it easier to find the weakest and strongest points of your spending.
TRACK YOUR EXPENSES
If you are struggling to stay within your budget, you might want to start tracking all your travel expenses. Create a simple excel spreadsheet, get a notebook or download one of those tracking apps.
Either way, seeing where your money goes helps you to keep you to stay on course. Even after all those years, we usually keep a record of our travel expenses to see whether our estimations were realistic or not.
When you see in real-time that you are overspending, you have an opportunity to change it.
For example, if you are staying in private ensuite rooms, then you might want to reserve dorm rooms until you lower your accommodation expenses.
If you see that you paid a significant amount of money for drinks, then you should take a break from hitting the bars every night, and so on.
Travel Resources
Here you can find links to all the travel resources we use and which you might find helpful when planning your next holiday.
Accommodation: When looking for accommodation, we usually search hotels via Booking.com or Hostelworld.
Tours: Although we love to travel independently, some places are better to visit with a guided tour.
We prefer GetYourGuide for its easy-to-use interface and solid reputation. Another great alternative is Viator.
Rental Cars: When going on a road trip, we always use Rentalcars.com, a reliable site for booking a rental car in advance.
Flight Tickets: When looking for flight tickets, you can search Skyscanner to find the best price.
Travel Insurance: World Nomads and SafetyWing cover against risks of travel.
