Budgeting For Your Leap
Whether you are budgeting for a year off or a summer in Tuscany, one of the biggest questions that comes up is, “How much money will I need?”
When I quit my job to take a year to backpack around the world, I gave myself the summer to plan the trip while my husband worked, because I knew I wouldn’t have the bandwidth while I was working full time.
If you’re starting from scratch it can take a significant amount of work and iteration to feel like you have a budget you can feel confident won’t balloon the minute you land. I have to confess that I am a bit of control freak as well as a conservative spender so it was important to build a budget that would be realistic.
Step 1: Capture Your Current Costs
Check Your Account Statements
If you don’t have an online tool like Mint that helps you visualize your spending, you may need to go brute force and review each credit card and bank statement.
Categorize Your Spending
Group things together into categories like utilities, mortgage/rent, entertainment, eating out, etc.
Step 2: Identify What You Can Cut
Regardless of your budget, it’s a good time to do some spring cleaning on the myriad of automatic payments you’re making. All those monthly $9.99 streaming services you pay for and never use? Cancel them. Look for opportunities to practice radical unsubscribing to cut back on waste and reinvest that money in more fulfilling ways.
Step 3: Create a “Home Base” Budget
Even when you are away, there are still costs associated with “home base”. Here are some to consider:
Are you keeping a residence? Consider property tax, mortgage, maintenance, and insurance.
Are you renting your place? Consider property management, moving/storage unit costs and other maintenance fees.
Are you keeping your car? Consider storage, insurance, registration, or even better, selling it!
What other costs will need to remain constant? Health insurance, cell phone bills, professional memberships, software licenses?
Step 4: Create your Trip Budget
This is where things get a little wilder as so much depends on where you go, how luxurious and at what speed you wish to travel.
We advise making some educated guesses on what type of spending you’ll do and use the high estimates to allow for buffer.
Pick an average daily budget for food and lodging. Sometimes you’ll be way under, sometimes you’ll blow it out. The idea is that it’s an average that gives you flexibility and freedom from stress.
Pro Tips to keep your cost down:
Travel Slowly. Stay in one location longer. Renting a place for a month can be half the rate per night then renting it for the weekend.
Leverage less expensive locations. Spending more time in Asia will significantly reduce your overall trip budget. Western destinations like Europe and Australia will blow your budget much more quickly.
Explore the off seasons. Italy in August for a month will get you 3 months in Cambodia or more. Booking in the off seasons will give you more options for better prices and more opportunities to connect with the locals as tourism subsides.
Use a Budget Tracking App. I’ve used Trail Wallet for years but there are many other great travel budgeting apps out there as well. It’s amazing how effective it can be on your budget to have to add every item you purchase and watch the # go up.
Step 5: Learn and Iterate
Like any habit, budgeting becomes a mindset and way of working with time. Take your best guess, start tracking, observe, learn and update your assumptions as you validate them.
For more on budgeting and all aspects of planning your Leap, check out our Making the Leap program designed to help you shortcut to the tools, knowledge, shortcuts and support to accelerate your leap in just a few short weeks!