Let's start this blog post with a short exercise. I want you to get out a sheet of paper and write down all your set expenses. Write down how much you pay for your rent (mortgage), your car payments, cable bill, cell phone, insurance and the like. Tally them up.
Then write down all your discretionary spending. This is what you spend on food, movie nights, drinks, shopping, that daily coffee from Starbucks, cigarettes, sports tickets and other similar things. If you don't know what you spend money on, go track your expenses for a two-week period and see what you spend.
Add that all up -- what did you get? Probably a lot of money. And I bet there will be a lot of stuff in there that you never expected. Financial experts call these "phantom expenses" because we never know they are there. People bleed money without realizing it. A dollar here and a dollar there really adds up.
What does this have to do with travel? Well, what's one of the main reasons why you think you can't travel the world? Money. "I can't afford it," people say to me. "I have too many expenses." To be blunt, I think that's crap. My book is called How To Travel The World On 50 USD Per Day. That's $18,250 USD per year. Do you spend more than that per year just living your life? Most people do. I did when I was settled down.
I want to highlight the ways I cut expenses before I left on my trip in order to save money for travel. There are some added ones in here too that didn't apply to me but might apply to you!
Cut the coffee - Love your Starbucks? Well, Starbucks loves your money. Coffee is the little thing that quietly drains your bank account without you ever noticing. That daily coffee costs you $150 per month ($5 per coffee). At $1,800 USD per year, that's two months in Southeast Asia. What's more important, your daily cup of Joe or getting to spend two more months on the beaches of Thailand or exploring the jungles of Borneo in Malaysia? Give up the coffee, switch from the cappuccino to a standard brew, start drinking tea or brew your own cup.
Learn to cook - We all need to eat but restaurants are getting quite expensive these days. Even with this recession, coming back to the U.S. I've noticed that food prices are a lot higher than they used to be. I learned to cook while in college (a skill that has helped me ever since) and before I left, I cut down my eating out to two times per week. Every other meal was cooked. I cooked dinner and then used the leftovers to eat lunch, thus saving more money. You don't need to be a whiz in the kitchen, either. There are a million and one cooking sites that will teach you how to cook fast and healthy meals, perfect for people without a lot of time.
Lose the car - Cars cost a lot of money between insurance, repairs and filling your tank with gas. If you can, get rid of yours. Learn to love the bus, take the subway or walk. It took me longer to get to work using public transportation but you'll find that you don't really need a car as much as you think. I understand that this tip may not be feasible for everyone, especially those in smaller towns that don't have a good public transportation system, but a good alternative is to sell your car and buy a cheaper used car. You will only need a car to last you until you go away. Buying a "throw away car" will allow you to pocket the money from your more expensive car and put it towards your trip.
Find a roommate - Lowering your housing costs will allow you to see huge gains in your savings. Get rid of that apartment or bring in some roommates. If you can, try to move in with mom and dad. Six months before I went abroad, I moved in with my parents. It wasn't that fun being 25 and living with my parents but I saved over $3,000 in rent as a result. If this is not an option for you, bring in a roommate. Turn that living room into a spare room and get a housemate. In NYC, people turn living rooms into bedrooms and studio apartments into two bedrooms by adding a folding screen through the middle of the room. It's not the most ideal living situation, but it does save money.
Get rid of cable - In the age of Hulu and free (and legal) streaming TV, there's no reason for you to be spending $50 per month on cable television. Get rid of it and just watch everything online for free.
Ditch your landline - Ok, I honestly only know about 10 people these days who have anything other than a mobile phone, but if you do have a mobile phone and a landline, you don't need both. Ditch your phone line (unless you have cable internet through it) and save money.
Downgrade your phone - Having an iPhone costs about $83 per month. I know: That's what I get charged for the cheapest plan! (Thanks Verizon!) Even when I try to get to the lowest level of service possible, it is still expensive. While smart phones are handy devices, getting a cheap phone without any fancy apps will cost you half that per month. You might get bored on the train not being able to read the news, but saving $500 in year will be better put towards a few more weeks in Europe, nicer meals or a learning to scuba dive in Fiji.
Get a new credit card - A travel credit card can give you free money, free rooms or free flights. By accruing miles and rewards points with your card, you can redeem them for free travel on your trip. After all, the best way to save money is to not have to spend it. And that trip doesn't need to be long -- you can use those points on a trip that is two weeks or two months. A free flight is a free flight. You'll see the most benefit from this by starting early: As soon as you decide to travel the world, get a travel-related credit card and begin earning free points on your daily purchases.
You can find out more on picking a travel credit card with my guide here!
Open an online savings account - While you are saving money, you can have it grow a little bit more by putting it in a high yield online savings account. This is what I did while I was preparing to go away and I netted a few hundred dollars extra. Interest rates are pretty low these days but you can still get 1-2%. Good online US banks include:
- Discover Bank, http://www.discoverbank.com/, interest rate: 1%, no fees, $2,500 USD opening deposit.
- Virtual Bank, http://www.virtualbank.com, interest rate: 1%, no fees or monthly minimums. Requires $100 USD opening deposit.
- ING Direct, http://home.ingdirect.com/, interest rate: .85%, no fees or minimums.
Get Charles Schwab - Charles Schwab bank refunds all your ATM fees and has no account fees. This works out great when you are traveling overseas but can also be valuable if you are ever someplace where your local bank doesn't have an ATM. No matter where you are, you never pay another fee again with Charles Schwab.
Sign up for travel newsletters - No one likes to clutter up their inbox, but by signing up for mailing lists from airlines and travel companies, you'll be able to get updates about all the last-minute or special deals that are happening. I would have missed out on a round trip ticket to Japan for $700 (normally $1,500) if it wasn't for the American Airlines mailing list.
I recommend signing up for Airfarewatchdog as they seem to do the best job at finding unadvertised airlines deals. If you only sign up for one newsletter, sign up for theirs. For general travel deals, Travelzoo is pretty good. I would also consider checking out The Points Guy and Travel Hacking Cartel for information about the latest deals for free sign-up bonuses and loyalty points that can get you closer to free hotel stays, money and flights.
Build a network on Couchsurfing - Building a network on Couchsurfing can help you make friends with locals and get free accommodation when you do travel. But if you have never used it before, you might not get a lot of responses. After all, someone with no reviews or who isn't vouched for isn't an appealing candidate. Before you go away, sign up for CS, find the local meet ups (they're always happening) and go visit. You'll make friends, get added to people's profiles, get vouched for and have a network you can utilize when you go away.
Replace your light bulbs - Electricity costs money, and since every penny counts, use energy efficient light bulbs which cut down on your utility bills. Florescent light bulbs now cost as little as $2.50 for a pack of two and save $6 per year off your electric bill. Plus, due to energy efficiency initiatives in certain states, many utilities will give you a rebate if you buy them!
Buy second-hand - Why pay full price when you can pay half? Use websites like Amazon (discounted books and electronics), wholesale websites and clearance sales (REI, my favorite gear company, has a clearance section) to buy at discount.
Cut coupons - The Entertainment Book, grocery coupons, Groupon and loyalty cards all reduce the price you pay at the register. Clipping coupons might make you feel like an 80-year-old grandmother, but the goal here is to be frugal and save money and coupons definitely help with that.
Sell your stuff - When I went overseas, I looked around my apartment and saw a lot of stuff I had no need for anymore. TVs, couches, tables, stereo equipment. Instead of keeping it in storage (which costs money), I decided to just get rid of everything. I sold it all and used the money to travel with. After all, while eating pasta in Rome, I'm not really going to need my couch am I! Sites like Craigslist and Gumtree are excellent places to go.
Skip the movies - I don't know about you, but I find movies to be ridiculously expensive. It can cost up to $15 for a ticket and an equal amount for the popcorn and soda. Cut out the movies, rent them online via Netflix ($7.99 per month) or iTunes ($1.99) or find other means. Whatever you do, cutting out trips to the movies will save you a bundle, especially if you are like me and love the movies.
Stop drinking - Alcohol costs a lot of money. Cutting down the amount you drink is going to have a big impact on your budget. If you are young and carefree, you might go out with your friends a lot on the weekend. Don't. It may not be as fun staying home but cutting down the amount of alcohol you consume is considered "low-hanging fruit" and an easy way to save money.
Quit smoking - Smoking not only kills you but it kills your wallet too. At $10 per pack per day that is $3,650 per year. That's a lot of money. Even if you smoke half that, that's still enough money for months in Central America. If you don't want to stop smoking for your health, do it for your trip.
Listen to the experts - There are other ways to save money that can pop up here and there. Follow some of the financial experts in the world on ways to not only save money but earn extra money. Some of the best financial sites are Man vs. Debt, I Will Teach You to Be Rich, Get Rich Slowly and My Money Blog.
Cutting your daily expenses, being frugal, as well as downgrading to a simpler way of living will allow you to save a lot of money for your trip around the world without having to find extra sources of income. I know because it's exactly what I did. These tips alone can shave a few thousands of dollars and that type money that suddenly makes your dream trip seem less like a dream and more like a reality.