How to Save Up Money for Travel (2024)

The real problem we encounter when trying to save up money for travel isn’t actually our inability to save…it’s how good we are at spending.

We don’t take an honest inventory of what we’re buying and what we’re spending. We pay for things blindly, only thinking afterwards (usually with quite a bit of shock) about how much we actually spent.

How many times have you opened your bills, winced, then shrugged and said, “I guess I spent that much?” –Ramit Sethi

Ramit Sethi is the financial advisor we all wish we had. His New York Times Bestseller, I Will Teach You to Be Rich, has some insanely relevant and practical advice for 20- and 30-year-old’s like us. He’s also funny as hell.

The title is audacious, I know, but its pages are gold. This book has probably made more of an impact on my adult life than anything else I’ve read.

Sethi lays out exactly how we should be structuring our finances as young professionals. His advice isn’t about how to save as much money as you can. It’s about balancing your life and your finances so that you always have the money you need to do the things that you want.

The crux of his spending plan is actually quite simple.Instead of looking back atyour spending at the end of the month, you look forward and decide how you’re going to spendthe money you have.

When you make more calculated decisionswith your finances, you can be proactive about putting a certain amount of it away for savings.

Step 1: Restricting Spending vs. Prioritizing Your Interests

The problem I have with these guides to saving money for travel is that they focus on restriction. When we restrict ourselves, we don’t live an enjoyable life, yet the whole reason we’re traveling is because we want to have fun.Does that make sense to you?

If you want to save up money for travel, sure, you couldcut every last expense you have and save every dime. But that’snot a reasonable or sustainable approach for the majority of people.

Youdon’t have to be miserable during the saving phase just so youcan appreciate the travel phase.

Plus, if you want travel to be a part of your life, you’re going to be saving up for a long time, over and over again. You need a sustainable plan.

Instead of cutting things out and focusing on restriction, you should be more focused on spending money on the things you enjoyand notthe things you don’t. It’s pretty straightforward, actually. Make more room in your life for the things you love, which leaves less room for the things you don’t.

Not only is this good money advice, it’s good life advice.

It’s funny because we learn so many things in school about how to make money when we’re older, but we learn almost nothing about how to actually manage the money that we make. My parents never taught me how to handle my finances, and I’ve made some costly mistakes because of it.

My guess is that nobody ever sat you down and showed you how, either, and that’s exactly what I’m going to do now.

Let’s Do an Exercise…

Write down all of your monthly expenditures. Seriously, grab a piece of paper or open a text document on your computer and start writing. I’ll wait.

If you want to make things easier, you can try thespreadsheet I created tohelp you with this exercise. You just enter the numbers and it magicallytells you how much of your income you can afford to allocate for different aspects of your life, including travel

1. If you downloaded the worksheet, just enter your incomein the first sectionand what you spend on your monthly essentials in the second.Essential items arerent, utilities, groceries, student loans, etc.If you’re using a piece of paper, add it all up for a monthly total.
2. In the next section, start filling out your other monthly expenses (or create another column that lists everything else).It could be Spotify, Netflix, coffee, a gym membership, whatever.Write down every single thing that you spend money on every month, and add it all up.
3. Now figureout which ones are your highpriority expenses andwhich ones are your lowpriority expenses, andput them in different lists. Do you see any trends?

Step 2: A Spending Plan That Helps You Save Money for Travel

Once you’ve figured out what you’re actually spending every month, you can start to look athow you’re spending it. Use the guidelines below andcompare your current spending trends. How much more or less do you need to spend in each category to hit thetargets?

• Rent, utilities, groceries, loan payments and other essentials should cost about 50% of your take-home pay. How does your total number compare to this? You might need to adjust your lifestyle if you’re spending more than this. If it’s less, good on ya!
• The money you spend every monthshould be somewhere between 20-30% of your take-home pay. Take a look at your list—is your total spent monthly about half of your rent/essentials? It should be.
• Your savings for travel should also be about 20-30%, but you can reduce this to as littleat 10% if you’re happy to spend more on your day-to-day life and save a little bit less. It all depends on your goals.

At the beginning of every month, pay your rent, pay your credit cards, and transfer money into your savings account. Once you’ve paid for your essentials, whatever is leftover in your checking account afterwards is everything you get forthe month.

You can safely run your checking account down to zero, knowing that you’ve already paid for and saved everythingyou need to.

The rule with your leftover spending money is that you are only allowed to spend it in exactly the way that you decide ahead of time. Let’s say you have $500 leftover to spend every month. If you allocate $200 for going out with friends, once you use up the fund, you’re not allowed to go out anymore. You have to be willing to decline and spend a night in with Netflix instead.

If you overspend on going out, then you give up something else, which is exactly what we’re trying to avoid—giving anything up.

So you have to look at your list of high priority and low priority items, anddecide how much you can spend on each item.Can you reduce any of your low priority expenseswhile keeping your high priority ones?

For instance, even though you might enjoy going to the gym, would you be willing to give up the monthly fees and work out at home instead? Can you shop around for a better rate on your renters or homeowners insurance?

What about TV?Could yougive up everything but Netflix?

When you look at the numbers, you may realize that you have to restructure your lifestyle a little, but you don’t have to give up the things you love.

According to Forrest McCall of Don’t Work Another Day, making travel a priority in your life doesn’t mean that everything else should be ignored. Knowing where your money is going ahead of time is the key to spending it wisely.

Following these basic guidelines, I’ve managed to save a few thousand dollars in just a couple of months (while paying off credit cards and traveling at the same time). That’s pretty good, as far as I’m concerned.

The best part is that you only have to do this restructuring one time with small bits of maintenance and tweaking along the way. In complete honesty (and I’m not just saying this because it sounds good), a couple hours of your time could end up paying for your next vacation.

Step 3: Saving Money While You’re Actually Traveling (aka The Same Advice)

A few months down the line, once you’ve reached your savings goal and you’re ready to go travel, please don’t see this as an opportunity to splurge. The basic rules of money (unfortunately) still apply.

You should follow the same structure of prioritization, and work out how much of your budget you’re ready to spend on each facet of your trip. Different countries have different prices for things like food and accommodation, so you’ll need to take this into account as well.

Sometimes, depending on the country, it can work really well in your favor.

If you decide that you’re going to budget $25 per day in China, work out how much everything costs ahead of time, allocate the appropriate funds, and whatever money is leftover is what you get to play with.

If there are certain things that you value, continue to prioritize them! Want to keep drinking $5 coffee? Include that in your travel spending plan up front.

If staying in hotels is a priority for you, then feel free to spend your predetermined amount on it! And if not, then you can stay in hostels.

When you follow the same guidelines while you’re traveling, you realize that you’re not giving anything upat all—you get to enjoy everything that you want and you get to spend your money however you like. You just have to choose where it goes ahead of time.