January 4, 2013

Guest post: How to budget for fabulous adventures

Well, like many people do this time of year, I took a little break around the holidays.  But now that I'm done stuffing my face with pork, collard greens, cornbread dressing, cookies, bourbon, and New Years Eve champagne, I'm back!  Although, I'm still kind of in a food coma.

With it being a new year and all, perhaps you made a resolution.  Mine involves wearing more red lipstick.  But if yours involves taking a trip, then you have come to the right place.  Today, I'm thrilled to have a guest post from Jason Hull of Hull Financial Planning on figuring out the financial aspects of your next adventure.  Jason is a financial planning expert and an avid traveler, and I can't think of anyone more knowledgeable about budgeting for your next trip! And if you are in need of someone to help you save and budget for, well, life in general, do yourself a favor and shoot him a note.  He's the man.  Enjoy!


The worst thing about being a tourist is having other tourists recognize you as a tourist.” – Russell Baker

When I lived in Germany, I tried to travel every weekend that I wasn’t deployed. I figured that living in the middle of Europe, I could reach a ton of interesting places in under a few hours of driving. I also wasn’t particularly savvy about using youth hostels or finding cheap accommodations, so I’d grab a couple of friends, and we’d head out and figure it out when we got there.

That was great for building up a ton of memories (and with the beer halls, removing a few memories), but since I was a lieutenant in the Army, I wasn’t exactly made of money.

Fortunately, or so I told myself, that’s what Visa was for. They could let me have fun now while paying for all of that fun sometime in the far distant future.

 Once I got back to the United States, there was a piper to pay. Its name was MBNA, and over the next few years, I came to hate MBNA is the fury that I normally reserve for the Naval Academy when they beat us yet again in football. 

It took me four years to get out of the mess I’d dug myself from my less-than-frugal travel habits during my three years stationed in Germany. I vowed never to let that happen to me again. Three years of fun in exchange for four years of Sisyphean efforts to pay off a slew of credit card bills? No thanks.

Can you have your cake and eat it too? Is it possible to travel and not break the bank? Do you have to be rich like Jay-Z to jet set?

Of course you can...within reason. I’m not about to tell you that it’s possible to fly first class, live in luxury hotels, eat at fancy restaurants, shop like Paris Hilton, and make the income of a McDonald’s fry cook. That ain’t gonna happen.

But, if travel is important to you, then it is something that you can incorporate in your life without going over a personal fiscal cliff to get there.
  • First, you need to determine what sort of travel you’d like to do. While we’d all probably like to fly in private jets or sail around the world in 200’ yachts, that’s simply not realistic. At least, until someone we know wins the lottery and we can develop appropriate blackmail on them. So, determine the type of travel that you’d like to do which is within your means. Do you like longer trips and are willing to sacrifice a little on accommodation, such as camping in a tent in Namibia? Or, do you want short, but luxe lodgings and to be pampered like a queen?
  • Next, determine what the trip will cost. I like to use a couple of sites to get my estimates. First, I use Kayak to get a sense of what it will cost to fly there if I have to fly. Then, I go to Hotwire and VRBO (Vacation Rental By Owner) to see how much it will cost to stay there. You can also use a site like HostelWorld if you are willing to stay in a hostel. If you like higher end, try LuxuryLink. Don’t forget that you’re going to have to feed yourself while you’re being a gadabout. I like to use Numbeo to get a sense of how much restaurants and food in grocery stores cost in the place where I’m going.
  • Then, figure out how often you can travel in a year. Some people have more flexible travel arrangements than others, so things like vacation days that you’re allotted in your job as well as your financial capacity will answer just how much you can travel in a given year.
Once you get a sense for how much your travel budget is going to be, you need to start saving up for it. What we like to do is to take our annual travel budget and divide it by 12. Then, each month, we set that money aside in a separate savings account. That way, when the time to travel comes, all we have to do is to transfer the money from the savings account back to the checking account, pull the cash out, and we’re off. 

No more vacationing on layaway. 

The first time we took a trip where the money was already budgeted and there in the account was a freeing one for me. Instead of wondering how we were going to pay for it or thinking “boy, this dinner cost more than I expected!” I knew that we had the money and, as long as we were reasonable in what we did, ate, and drank, we’d be fine. It allowed me to enjoy the trip without having to worry about the financial aspect of the vacation. 

So, do you need to sell everything and become a permanent traveler? No, but you also don’t have to forego travel if that’s what’s important to you. 

For some reason, people don’t like to acknowledge or deal with the costs of travel. It’s either a limiting belief that they have (“I can’t afford to travel”) which covers up other things, or it’s something that people just disregard and figure that they’ll deal with it later. I lived for three years doing the latter, and while I built up some great memories, I’d probably be able to look back on those memories even more fondly had I been sensible about budgeting for travel. 

 Jason Hull is a candidate for the CFP(R) Board's certification, is a Series 65 securities license holder, and owns Hull Financial Planning. He is also a personal finance columnist for U.S. News & World Report. He sometimes goes by the name “Nathan.”  

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