Budgeting Your Trip

How do you budget for a four-month trip? I got asked this question a couple of times. To be honest, it is not very different from budgeting at home. The basic idea is to identify the costs, some fixed, and some variables. In this post, I try to document my approach and hope it can help you prepare for your next big trip.

Fixed Cost

There are certain costs that are known and fixed ahead of time. I like to make sure I record as many of these as possible. Some of these known costs are:

  • Flights
  • Hotels
  • Health insurance
  • Travel insurance
  • Major train tickets (e.g. JR Pass, High-speed train tickets)
  • Tickets to major attractions (historical attractions are usually dirt cheap but shows or exhibitions can be expensive)

Besides these costs which will be incurred as you travel, unless you are permanently living a nomadic life, one day, you will need to come back to your home country and pick up where you leave. This, unfortunately, means that you will need to keep paying some of the expenses back home, e.g.

  • Any debt you owe (credit card, mortgage)
  • Phone bill (if you intend to keep your home number)
  • Utility bills (if you own/rent a property), etc.

Some of these expenses can be reduced because of your absence but you must consider them in your budget. (See Manage Your Fiances Before You Go for some information)

Important

I would also recommend buying a travel insurance policy that provides trip cancellation. This is especially important if you have an elderly or own property back home.

Variable Cost

After the fixed costs, there are variable costs. As you travel, you will likely spend more money on food and drinks than you'd usually do back home. The commute expenses will likely be another major cost of living as you travel. These are usually not known ahead of time.

Instead of planning each meal or commute in advance, depending on your travel destinations, you can use a multiplier to your usual meal and commute expenses back home. For example, for Japan, I would budget two times my usual meal and commute expenses because I know that food prices in Japan are comparable to the ones in Canada. This way, I can afford to have an expensive meal now and then but fall back to a budget one occasionally. For China, however, the multiplier would be 0.5 because the living expense is a lot cheaper in China than in Canada.

If you are traveling with kids, I would also recommend you stay in places where you can do some minimal cooking. There are many benefits in cooking your own food while you travel:

  • You can save quite a bit of money.
  • Your kids can eat familiar foods with a twist of some local flavors.
  • You can mingle with the locals in the grocery stores and truly feel like you are one of them.
  • Most important of all, all of you can eat healthier.

Manage your finances

Before you go on a long trip, it is important to make sure your money at home is taken care of. As you will read below, it would be harder to manage your finances when you are abroad. You certainly don't want to face a pile of unpaid bills and their accumulated interests when you are back home.

Setup Pre-authorized Payments

Important

Give yourself plenty of time to set up these pre-authorized payments so that you can verify them before your trip.

Utility Bills

Paying your utility bill online at home is easy but it is a different story when you are abroad. You will need a reliable and secure internet connection. You may even need to receive an SMS if the bank requires you to.

A better approach is to set up pre-authorized payments so that you don’t have to worry about paying your bills on time. Most utility companies provide means to set up pre-authorized debit. If you need to pay property tax, its payments can often be scheduled too.

If you haven't set up paperless bills, now is a good time to do so. You can conveniently access your bills on the go and you save some trees.

Credit Cards

In Canada, many people don’t know that you can set up pre-authorized debits (PADs) for their credit cards as well. You can decide whether you want the total amount or the minimum payment to be deducted from your bank account each month. Given how much interest you’d have to pay if you miss a payment, setting up the pre-authorized debit option can save you a lot of money.

Why Oh Why?

Different credit card companies use different ways to set up PADs. Mine all require me to print a physical form, fill it in, and mail it to them. Yes, this feels so backward in this day and age. Unfortunately, since there’s no incentive for the credit card companies to provide this service, I doubt they will improve the process much.

Prepare For Banking Abroad

Login Method

Nowadays, many banks require some form of two-factor authentication to log in. This means that, as a user, you will need to set up either a mobile number (for SMS during login) or an authenticator app on your smartphone.

If your bank requires a mobile number for SMS authentication, it most likely won't work when you are abroad. There are a couple of ways to deal with this:

Register a mobile number of your destination in advance of your trip

This is tricky because you typically don't get the phone number until you activate the SIM in your destination. Alternatively, if you have a trusted friend/family member residing in your destination, you can add his/her number in advance. This seems dangerous but in theory, if you don't also give out your password, your friend/family member won't be able to log in to your account.

Disable two-factor authentication on your mobile app

Banks that require two-factor authentication usually allow you to disable it when you log in through the app. If you can fulfill your banking needs using its app alone, this is a good alternative.

Electronic Statements

While you are at it, you might as well set up electronic statements so that you can access your statement on the go and your physical mailbox will not overflow.

Cancel any unused Credit Cards

If you happen to stumble upon a credit card that you no longer use, it’s a good idea to call them up and cancel the card.

Subscribe to a reliable VPN service

If you have been following the above recommendation, you will likely be banking online most of the time. It is important to subscribe to a reliable and secure VPN service. In places where a national firewall exists (like China), not every VPN provider will work. So I recommend you install more than one VPN app on your smartphone before you go. In case one of them fails, you have a backup. Once you are in one of these countries, you won't be able to install any of these VPN apps.