Time and money are the two limitations preventing most people from traveling more. This article is going to show you how to take care of the money problem by creating your own travel fund.
There are at least three options I see for getting the dough you need to pay for travel:
- Budget your monthly living
- Earn extra/more income
- Utilize your borrowing power
How to create your travel fund
Let’s walk through the steps you’ll need to have a travel fund by utilizing the first two options above, and then we’ll talk about utilizing your borrowing power to go on your trip even sooner.
Step 0: Make travel a priority
If you want to travel more, it’s the same as wanting to lose weight, learn a skill or anything else – it has to be a priority. So for some period of time, you need to schedule the time to learn more about traveling and make financial decisions based on your travel goals.
Step 1: Create a Capital One Savings account
Set up a Capital One 360 Savings account.There are probably similar banking options for non-Americans if you research, and probably more options for Americans out there, but this is one of the easiest solutions I’ve discovered.
What’s great about the 360 savings account is the ability to create savings goals (pretty much a savings account inside of a savings account) and automatic transfers.
So if you do look for an alternative, something offering similar features is the way to go.
Step 2: Set up a travel goal and plan automatic payments
If you’re able to use Capital One 360 Savings, this is no problem. Create a goal called something like “Trip to SE Asia,” and give it a tentative target of $2000 per person in your group for international travel, or $750 per person for domestic travel. So a family of four should be thinking about $8000.
You hopefully won’t need that much, but for now, work with that number to create goals.
The objective here is to have money set aside for travel. Then you can start learning and planning how you can stretch that money as far is it can go.
For your automatic transfer into this goal, give yourself a time frame of 15-18 months. So going on our example above, you’d need to automatically be tucking away $533.33 – $444.44 every month.
Don’t freak out by that number and leave on me. Here me out.
You don’t need to set up the automatic transfers yet. That number is simply a goal.
Step 3: Budget your monthly expenses
Budget. There. The word everyone hates to hear is out there.
But if travel truly is your objective, budgeting to find ways to save extra money every month is great personal finance training.
If you’re already good with personal finance, this should be no problem.
If you’re not, then a small goal like travel is a relatively cheap purchase compared to other purchases like cars and houses. So this will be excellent practice and a big discipline builder.
There’s a lot of info on personal finance and budgeting online, and we have a previous article on ways to save money for travel.
So realize that travel is not something that will simply happen because you want it to. It requires learning some new things, and personal finance is going to be one of those things for many people.
Don’t spend a ton of time on this, but quickly look for ways you can save at least 10% of your estimated goal. Do as best as you can without creating an utterly abysmal lifestyle. Budgeting is simply one way you’ll be getting money for travel.
Tally up what you expect to be able to save every month, and write it down.
Step 4: Put your skills and free time to use by finding extra income
Budgeting is severely limited by your current income level, so if budgeting alone isn’t getting you close enough to your travel fund goal, it’s time to increase the money you’ve got to work with.
First, look at the total you wrote down from Step 3 and subtract it from your monthly savings estimate from Step 2. That’s going to be how much extra income you need to produce, which is probably going to be a very doable number.
For example, let’s say I need to put away $500 a month for my travel goal, and budgeting is only showing me an extra $200 a month I can easily put together short of becoming a monk. I only need to produce an extra $300 a month to meet my goal.
Let’s put that into perspective. $300 a month is only $3600 a year.
And if you’re able to split that with a spouse/partner, you each only need to have $1800 extra a year.
That’s an amount you might be able to easily negotiate with your employer as a pay raise. At the very least, you could spend extra time on nights and weekends learning a skill that would make you more valuable at work which would make getting that raise a no-brainer for your company.
If salary negotiation isn’t an option, you’re left with 1) looking for a new job (probably hard) or (2) generating the income on your own (easier).
Look around at the categories of jobs and think about what skills you have that might be marketable there. Build out your profile and give it a shot!
This could also be a great motivator to learn something new that you’ve always wanted to do, or improve on an existing hobby.
If you’re still struggling, research more online about extra ways to earn money. Be creative, and don’t give up!
Option: Benefit from cash back rewards on credit cards
Many of the best cash back credit cards offer $150 as a sign up bonus that can be pretty easily attained from normal living expenses. You’ll probably also be able to get at least a few hundred dollars in cash back throughout the year.
If you’re able to get a two or three cards over the course of your savings period (15-18 months), that could add up to a nice chunk of change. If you got two new cards, that could be $300 (normal cash back) + $150 (sign up bonus) x 2 cards = $900 /year.
You’ll need to consider how this affects your credit score, remembering that being declined for a card negatively impacts your score. Sign up for Credit Sesame, and they’ll show you cards you have a good chance of getting accepted for. They also show tips to improve your credit score.
Write down the cash back rewards you think you’ll be able to achieve, and update your numbers in Step 2 and Step 3.
Step 5: Start the automatic monthly transfers
By this point, you should know how much money you can put away each month into your travel fund.
If you’re unable to contribute as much as you’d like, you have a decision to make.
- Do you start the automatic transfer with your estimate from step 2?
- Or do you start the automatic transfer with your estimate from how much you’ll really be able to save?
For option 1, there are personality types who will benefit as the added pressure will cause them to think creatively about ways to save even more or earn more income. But you need to know yourself.
If you don’t believe option 1 would benefit you, go with option 2.
Whatever you choose you can always change the automatic transfer later.
But you should be in the mindset of once the money lands in that travel fund, you’re not going to touch it short of a life-or-death emergency.
Option: Go on your trip faster
The problem with saving for something is… you’ve got to wait.
And sometimes it’s just hard to be patient when all you can do is think about is your upcoming trip.
The option we’re going to talk about now is not for everyone.
For example, if you’re going on your first international trip, don’t do this. You’ve got a lot to learn about finding the cheapest flights, booking cheap accommodations, travel hacking, etc. In other words, you’ve got time to spare to make sure you make the best financial decisions about your trip.
Also, this tactic won’t be ideal for someone with a low credit score, or who has struggled with credit card debt in the past. It’s far too risky.
Front-loading your expenses
That being said, here’s the tactic I first discovered from Money Can Buy Me Happiness.
Basically, you put all your travel expenses on a credit card you currently have, before you have the money in your travel fund to pay for it.
The reason you’ll be able to do this is because you’ll be taking advantage of 0% balance transfers and 0% APR sign up benefits on a new card.
Check out the link above for the specifics of this tactic.
I’d just add one more thing to the above mentioned article.
Go through the steps above to get your target travel budget set, and work out how much money you’ll need to save/earn on the side.
Because once you transfer your trip purchases to the new card with 0% APR, you’re going to need to have the money available to start paying that down before the free interest period expires (typically 15-18 months).
So this tactic is a go-on-vacation-sooner-pay-later type option, but you’re still going to be responsible for paying back what you owe without accruing more debt on top of it.
If you use this tactic, please make sure you stick to this plan and have the money to pay it back.
That’s it! Your travel fund should be ready to go when you are!
One final note. If your estimated travel expenses seem too high compared to the money you’ll be able to pull together, don’t worry. Start whatever automatic savings you can. Something is better than nothing. You can always join the movement of extreme budget travelers who find creative ways to travel the world regardless of financial restrictions.
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Do you have any suggestions or other tactics you’ve used to save money for travel? Please share in the comments.