Travel tips!
Oh the places you’ll go…
Whether it’s to visit family, experience a new place and culture, take a relaxing vacation, or just to commute for work, we know that traveling is deeply important. Because of travel’s significance, there’s no surprise that it represents a large portion of people’s annual budgets! So, in this blog we’re going to give you some ideas on how to plan for your travel in the new year, how to get the best bang for your buck when abroad, and finally, how to reflect upon your trips to figure out where to go next.
Planning your travel...
Our first travel tip is to plan ahead. Take a look at your calendar this year - what trips have you planned? What trips are you hoping to take? Have you sat down and thought about what amount of money you can or are willing to spend? Most big trips are not a monthly occurrence, so it can be difficult to figure out how to fit them into a monthly budget. We recommend (at least 2x/year) writing down all of the trips you are planning to take over the next 6-12 months to help better understand this number. For some of you this might seem unrealistic (maybe you’re at an age where friends are getting married, and you don’t know how many it will be in the year to follow; or maybe you’re one of those people who likes to take spontaneous ski trips when the snow falls or surf trips when the waves are picking up...). The beauty of this exercise is that it doesn’t have to be perfect. Your goal is to get a better - not an exact - understanding of how much you should be budgeting for travel on a monthly basis.
How do you do this?
On a sheet of paper, word document or spreadsheet, create a 6x7 table. We created one below in case you want to copy it! List the next 6 months down the left hand side, leaving some space (or 5 rows) in between each month. If you’re an ultra-planner, list the next 12 months. Create five columns: transportation, accommodation, food & drink, & activities and gifts.
Under the trip name column, list all of the trips you intend to take over the next 6 months. And then populate each of the columns with the estimated cost of the respective category. Be conservative! It’s better to overestimate than underestimate, because there will always be unexpected expenses. Here are some details on what should be included in each column, and some things to think about in terms of how to save, which we’ll talk about more below:
Transportation:
What to include? Round trip flights/train/bus, car rental and gas, uber/lyft/taxis, and public transportation tickets.
Ways to save? Take an indirect flight instead of direct. Track flights in advance using Google Flights or Kayak. Subscribe to Scott’s Cheap Flights or Next Vacay email lists.
Accomodation:
What to include? Hotels and/or home rentals.
Ways to save? Check if splitting an airbnb or VRBO with friends or family is cheaper than everyone getting their own hotel room. Can you rent your home out while you’re away? Can you do a home swap? Can you stay with friends for part of the trip?
Food & Drink:
What to include? Estimate a daily cost for food and drinks. Most travel guides will be able to help provide you with averages, but if you know you like to eat at fancy restaurants when you travel, look at what you’ve spent on past meals and use that as an estimate.
Ways to save? Staying somewhere with a kitchen can enable you to shop at local grocery stores and cook for yourself some of the time on your trip. Minimize your costs for breakfast & lunch by packing breakfast bars or opting to visit local markets instead of always having a sit-down setting. Remember that many places in the world do not have the same tipping culture as the US, because wait staff is compensated with this assumption.
Activities:
What to include? Concerts, sports, movies, theater, ski passes, beach club, golf round, amusement parks, boat rental - really anything that requires a ticket or fee to participate! If you need to rent gear, e.g. scuba or tennis racquets, include this in your estimate. Sometimes it helps to list out those activities to itemize the prices.
Ways to save? If you’re with a larger group, see if group rates are available. Check if your hotel offers any special rates. See if different times of day are more or less expensive.
Gifts:
What to include? Gifts for others and gifts for yourself.
Ways to save? If you’re someone who likes to shop while traveling, we have a longer section on this coming up.
Once you have written down all of the costs - and like we said, be conservative - sum each of the columns. Then sum the column totals to find out your grand total over the next 6 months. Finally, divide by 6 to find out your monthly travel budget!
What’s the right number?
This number is different for everyone, but we’ve learned that people like rules of thumb - so here we go!
Your annual travel budget should be no more than 10-15% of your take-home income.
What’s take-home income? It’s the amount of money you make after taxes on a monthly basis. If you’re usually a person who gets a tax refund at the end of the year, then the amount of money that hits your bank account from your employer on a monthly basis is that amount. How did we get to that 10-15%?
We have a formula:
Take-Home Pay
Minus Living Expenses: 60%
Minus Savings: 15%
= Equals 25% of Guilt-Free Spending
Surely you could allocate 100% of your Guilt-Free Spending to Travel, but as we’ve seen by tracking the cash flow for our clients, it’s not a viable reality. So, if you added up your trips and it’s above that 15% mark, we’d encourage you to go back through your estimates and see where you could make trade offs.
For example, could you drive instead of fly? Could you choose between activities or nice meals each day (e.g. activity day → opt for cheaper meal)? Is there another place that you could fly that might be more expensive to get there, but when you’re there, the costs are a lot lower? Are there certain trips that you could push out to later in the year or in the year to follow? Be proactive in this approach, because by planning ahead, you won’t need to come back after your trips stressed and regretful that you overspent.
If you’re the kind of person that needs help figuring out where to go and what to do, we’d encourage you to reach out to our friends at Peridot Travel who specialize in creating wonderful experiences around the globe. Just let Antony know your budget of no more than 10-15% of your take-home pay (if you take a trip once per quarter, then your budget will be 10-15% x Take Home Pay x 3 months).
I’m on my international trip. Any tips?
1. Use a credit card or debit card that does not charge you fees.
We have said it before and we’ll say it again. We hate bank fees. Before you travel, find out how your banks and credit card companies charge fees, because this can add up! Sometimes it will be a fixed charge per transaction and other times a percent of the transaction. In any case, why waste money with your bank when you can instead use it to enjoy your trip? If you’re looking for a resource that will help you decide between credit cards, Money.com recently compiled a list of the best credit cards for travel in 2020. .
2. Keep receipts while you shop. (This is for you, gifters.)
Shopping abroad is really fun and whether or not currency conversions work in your favor, by shopping smart, you can save some money along the way. Similar to how we have sales tax in the US, many countries have VAT, or a value-added tax, that is added to many goods and services you purchase abroad. As an American traveling abroad, you are exempt from paying VAT in many cases, because this is considered a local tax. The retailers won’t handle this for you, but instead it goes through a centralized system within each country. This means that the retailers will charge you VAT, but you can request a refund in the airport so long as you follow these steps. (There are sometimes VAT refund providers within major cities as well, but they may charge higher fees. And again, we hate bank fees.)
When you shop, request a VAT refund receipt. The receipt will be long and a separate receipt from what you would normally receive. It will list the items you purchased and provide you with a separate line item for the amount of VAT paid on the transaction. There is a section for you to fill out, which includes your name, email, address, passport info and flight info. To expedite the process at the airport, fill this out in advance.
Upon requesting your refund, you will also need the items you purchased handy, because the person will need to verify that you purchased these items on this trip (the limit is the last 3 months). If you can fit your items in your carry on - do it. You’ll be able to visit the VAT refund counter either in or outside of security. If your items are too big to put in your carry on, you’ll have to use the VAT refund counter outside of security.
There are plenty of reasons to get to the airport early, but this one should be high on your list. The lines can be long and yes, it can take time. But I can assure you that several people will have to jump out of the line, because they haven’t understood the aforementioned requirements for getting that refund.
So, to repeat:
Step 1: Request VAT Refund Receipt. You may need to have your US Passport or Drivers’ License ready to prove to the retailer you are eligible.
Step 2: Fill out the form on the receipt.
Step 3: Bring your goods to the airport, ready to show the VAT Refund Desk.
Voila! You’ll be able to request a refund to your credit card, debit card or via check. Essentially a 10% discount on all of your shopping!
3. Be mindful of low friction shopping.
The US is technologically advanced in many ways, but electronic payment systems are not one of them. Gone are the days in most parts of the world of someone taking your credit card to a different location to charge you. Most places operate either via chip or tap payment.
Having recently been in the UK, where tap is used everywhere, it’s almost too easy to pay for things.
I realized at a certain point that I had paid the bill at a restaurant and didn’t even know what the cost was, because I never needed to sign. We recommend double checking the bill and asking for the amount prior to ‘tapping’. Even just a moment of pause will help create more mindfulness around this frictionless spending.
Trip is done. Now what?
We love to spend time on reflection because it makes us more mindful of the decisions we make in the future. We have a few recommendations on how to reflect on travel so your years to come give you the most out of your hard earned money.
First, write down all of the major trips (those that cost over 10% of your take-home pay) you took last year and rank them from top to bottom. What did you love about them? What were highlights? What did you miss? What did you hope would have been different?
Next, go through your expenses from last year and calculate what you actually spent on these trips. You can either use our template above, or as an alternative, just sum up everything. Don’t forget the expenses you had when booking the trip, like flights and hotels. If you had created a budget, this is a good time to compare your budget to your actuals and see how you did. In any case, list out each of your trips from most expensive to least expensive with the dollar amounts next to them.
Finally, ask yourself the following questions: How does your first list compare to your second list? Knowing the cost of each trip, does this alter your perception of your first list? How might you change your travel plans with this knowledge?
We hope that these tips and reflections will help you travel more mindfully and successfully this year. Happy adventuring!
Stephanie Bucko is a fee-only financial planner based in Los Angeles, California and is the Chief Investment Officer of Mana Financial Life Design. Mana Financial Life Design provides comprehensive financial planning and investment management services to help clients organize, grow and protect their wealth throughout life’s journey. Mana specializes in advising professionals in the tech industry, as well as women who work in institutional investing, through financial planning and investment management. As a fee-only fiduciary and independent financial advisor, Stephanie never receives commission of any kind. She is legally bound by her certification to provide unbiased and trustworthy financial advice.