How many of us can find financial reasons to postpone or cancel our trips? If you raised your hand or nodded in agreement, I challenge you to continue reading. I can confidentially say that we’ve all been there. Our finances can absolutely undermine our ability to travel which is why I created this step-by-step beginner’s travel planning guide. As a financially savvy traveler, it’s important to get our finances in order so that we can do the things we love, in this case, lots of travel.
In the past two years, I’ve traveled to eight new countries and it all started when I decided that I would no longer let my financial obligations (student loans, bills, saving for a house etc) hold me back from seeing the world. You shouldn’t either! So let’s get started on how you can become a financially savvy traveler. And to clear the air, playing the points game is only one aspect of being a financially savvy traveler.
How To Become A Financially Savvy Traveler
A Beginner’s Guide To Planning A Trip
Step 1: Create a Budget (a.k.a. a plan)
Being a financially savvy traveler starts and ends with a budget.
A travel budget details your anticipated travel expenses. The more detailed and realistic the budget, the more likely it is that you’ll get to travel. Why? Well, when you anticipate how much your trip will cost, you can save appropriately.
In other words, budgeting is a fancy word for planning and anticipating how much you need to save to cover your expenses.
Determine Budget Categories
There are three major categories in every travel budget: airfare, lodging, and food. Since these are the basic necessities, estimate these first. Include other categories in your travel budget like activities and attractions, public transportation, and gifts.
Financially Savvy Traveler Action Plan:
- Without a destination in mind, calculate how you much you can afford to spend in each budget category.
- Next, based on your budget breakdown, pick at least three destinations that fit your basic budget (airfare, lodging, and food).
How I Do It: Read blog posts from other financially savvy travelers who have recently visited the destination you have in mind for insightful budget details. This will also help you figure out how long you can afford to visit a destination.
Here’s how much trips to various destinations have cost me:
- Iceland Budget Breakdown
- Bermuda Budget Breakdown
- Mexico City Budget Breakdown
- Toronto Budget Breakdown
Step 2: Sign up for Flight Alerts
Now that you have your top three destinations in mind, it’s time to start the flight search.
- Set price alerts (for flights) for your top three travel destinations.
- Watch out for price reductions and spikes; if prices get too high, rule destinations out. Monitoring price trends will help you narrow down destinations.
How I do it: When I have a destination in mind, I sign up for price alerts with Skyscanner and Kayak. The price alerts let me know of any price fluctuations, increases or decreases.
Skyscanner and Kayak also have great search capabilities where you can search “everywhere” and filter by “specific dates” or an “entire month”. This casts the net wide so it’s more likely that you’ll find a flight in your price range.
Update November 2017: By keeping an eye out, you’ll establish a baseline. Essentially, you’ll know how much flights generally cost. So when you find cheaper flights, you’ll know a phenomenal flight deal when you see one. The key here is to jump on it quickly.
For example, round-trip flights to Chicago are usually over $130 USD from New York City. However, when I saw a flight deal to Chicago for $79 USD, I purchased it immediately. Since I knew the baseline, I saved over $50 USD.
How I do it: I rarely have travel destinations in mind now when planning trips because I mostly follow flight deals. As long as the price is right, I’m willing to book flights to new and interesting destinations around the world.
Step 3: Get a New Credit Card
Although this step isn’t necessarily for everyone, opening new credits is a great way to quickly accumulate enough points and miles to travel cheaply and in some cases completely free. As a financially savvy traveler, strategically use your new credit card to earn and redeem travel perks such as free flights, checked bags, hotel stays and more.
How I do it: Since there’s so much at stake (free vacations), I rarely carry cash and I am less likely to shop at “cash only” establishments. I’m not the only one who feels this way, quitting cash is #5 on Eternal Arrival’s 101 Simple Ways to Save Money For Travel.
- Research travel credit cards. Compare credit cards and pick the one that offers the best value (high sign-up bonus and earning potential, low currency conversions and interest rate, flexible redemption options etc). Take into consideration if there’s an annual fee and determine if the perks outweigh the costs.
- Set a points goal.
- What do you want to spend your points and miles on?
- Where would you like to go? How soon?
- Open a new credit card and meet the minimum spend within the specified amount of time (often three months) to earn the sign-up bonus. Credit cards without foreign exchange fees are ideal. Also, as a rule of thumb, do not increase your spending to meet the terms.
- Use your credit card often and redeem your accumulated points and miles towards free and discounted travel.
Helpful Tip: Before signing up for a new card, make sure your credit is in good standing. Opening a new credit card affects 10% of your credit score.
Also, use The Points Guy to get the most up to date information about everything credit card and travel related. This site is also a great resource for learning how to play the points game.
Limited Time Sign-Up Bonus Offers
Keep an eye out for limited time offers where credit card companies up the ante and offer bonus sign-up points and miles for opening a new credit card. As always, it’s important to meet the minimum spend within the allotted time frame to get the bonus.
For example, for a limited time, Delta American Express offered 60,000 SkyMiles for the Gold personal and business cards and 70,000 SkyMiles for Platinum. These were the highest offers in the last year. By the way, Delta Air Lines domestic flights generally start at 25,000 SkyMiles round-trip and round-trip flights to Europe start at 60,000 SkyMiles. This is how I flew to Rome for only $75 USD through Delta SkyMiles Flash Sales.
Also, credit card companies sometimes offer extra points for adding authorized users and using their online shopping portals. Always swipe responsibly.
Step 4: Activate Special Credit Card Offers
After you’ve had your card for a while, your credit card company may send you limited-time offers to earn bonus miles.
For example, for a limited time with the CITI Advantage Platinum Select Card, you can earn 3 AAdvantage miles per $1 USD spent, up to 2,500 miles. That means if you want to take complete advantage of this promotion you’ll have to spend $833 USD to earn 2,500 bonus miles instead of 833 miles. This is a great way to fluff your account with more miles and earn free travel faster.
Step 5: Open a Travel Fund
Create a “travel fund” which is a separate bank account dedicated to your travel savings. This is the account that you’ll use to pay for all things travel related including lodging, food, transportation, attractions etc.
For better tracking, I recommend always keeping your travel funds separate.
- Open a bank account (checking or savings) with a travel-friendly bank (no ATM fees or maintenance fees).
- Designate all your travel savings (and expenses) to your travel fund. Make sure the account comes with a free debit card.
- If you use your credit card to make travel-related purchases pay off your credit card in full every month with your travel fund.
How I do it: I have a money market account with Ally Bank. Ally is an online bank that offers relatively high-interest rates, no maintenance fees, and easy access to funds online.
Step 6: Save Money, Honey
The key to making travel a financial priority is to treat travel like a recurring monthly bill.
- Set time bound travel savings goals.
- Calculate how many weeks you will need to save for your next vacation.
- Next, automatically make deposits to your travel fund.
How I do it: I’ve found that it’s easier to save the same amount every pay period. So for example, to save $2,000 for a trip to Germany in 20 weeks, I save $100 per paycheck.
How much money should you put aside each month to save for travel?
I can’t accurately put my finger on an exact amount of how much a financially savvy traveler should save each month because it all depends on your situation.
Budgeting and saving are subjective but whatever you decide, just make sure that it’s right for you. Nevertheless, things to consider when saving for travel include your income, monthly expenses, travel destinations, how often you want to travel, planned activities etc.
Step 7: Pick a Destination & Book
Commit to a destination that fits your budget. Consider traveling to cheaper destinations like Southeast Asia, Central and South America, India and Nepal. Also, with a strong US dollar, our buying power is a lot greater which means that lots of destinations are within financial reach.
One of my favorite travel budget tips from Phenomenal Globe is to keep your plans as flexible as possible. Don’t forget flexibility with your dates and airports will likely save you more money.
- After you’ve picked a destination, as soon as you have enough money saved to book flights and lodging (basic budget from Step 1) make your reservation. Or if you find a great flight deal, book your flights. You will have plenty of time to finish saving for food, activities, transportation, and gifts later. This is critical because flights usually increase as it gets closer to the departure date. Lock in the right price as quickly as possible.
Helpful Tip: Some travel enthusiasts pick a destination first and then plan a budget, however, as a rule of thumb, a financially savvy traveler keeps their finances in mind first.
Overall, these seven steps offer a foolproof strategy to travel planning. In my humble opinion, there is no point in budgeting for an exuberant trip that you cannot afford now or in the near future. Instead, focus on what you can accomplish now and plan more extravagant trips later.
Do you follow any of these financially savvy steps? Have something to add?
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