Constructing a savings plan for your travel fund

| September 22, 2009 | 6 Comments
This entry is part 2 of 3 in the series Funding Your Travel Habit

This post is part of a series of articles focusing on personal finances for a round-the-world trip; however, the savings and budgeting tips herein should be of concern to anybody with an in personal finance! The series comprises the following articles: Constructing a savings plan for your travel fundSaving For a Round-the-World Trip and Budgeting for the return home. Have any budgeting or savings tips that didn’t make the lists herein? Please contact us!

Adhering to the principles of some of our favourite personal finance blogs, we have come to realize that a key component of achieving savings goals is planning. Not unlike planning a round-the-world itinerary, saving for travel is a dynamic process that requires regular monitoring and reevaluation.

piggybank Constructing a savings plan for your travel fund

A key component of achieving savings goals is planning.

In general, a comprehensive savings plan has five steps:

Assessment. Here you must hold your proposed itinerary up to the glaring light of your financial situation. Once you have a general idea of your proposed trip’s day-to-day expenses (consult this handy round-the-world travel budget calculator) and the time you would like to spend abroad, you’ll need to compile a personal income statement that lists personal income and expenses. In our case, Kathryn and I have decided that a year is the perfect amount of time to challenge ourselves; it’s a period short enough to envision an end goal but long enough to be significantly challenging to keep up with over the long-term.

Setting goals. In our case, we wanted to have enough money to finance a trip around the world. At the same time, we had a timeframe—the only thing that we’re committed to thus far is a departure date. It is not uncommon for a savings plan to comprise several goals, some short-term and some long-term. Hence, we’re also hoping to put away enough money to sustain us for at least three months upon our return and, furthermore, enough money to cover the incidentals of renting our house and/or leaving it with a housesitter.

Creating a savings plan. The savings plan details how to accomplish your goals. It could include, for example, reducing unnecessary expenses and/or increasing one’s income in order to meet or exceed a savings target. Kathryn and I have concentrated on reducing our expenses in order to sustain a savings rate of ~40% of our net income. We’ve been able to maintain this rate now for ~12 months. It hasn’t been easy!

Execution. Execution of a savings plan often requires discipline and perseverance—what we like to refer to as stick-to-itiveness. We’ve found that sticking to a savings plan is easier if you can make it habitual. Sure, we struggled at the outset but with a little creativity and courage, it’s likely that we’ll reach and surpass our goals.

Monitoring and reassessment. As time passes, one’s plan must be monitored for possible adjustments. You cannot take chances by being too aggressive or too conservative at the wrong stages. You have only a limited time to accomplish your goals, and your must be sure to allocate your savings properly. What you really want is assurance that your money will be there when you’re ready to start globetrotting. So we’re pretty much talking about funneling your savings into money market accounts, short-term CDs and perhaps a bit in ultra-short-term bond funds. Kathryn and I are investigating our options, but are presently holding our travel fund in a ‘high interest’ savings account—although the return is paltry. Remember though, when it comes to your travel fund, the rule is stability first, return second. And, actually, with low (or declining) inflation, the current returns aren’t as bad as they appear.

After more than a few requests, our next post will focus on the tips we employ for keeping money in our wallets—and, hence, our travel fund. We’ve dished out a few saving tips here and there in the past, and also posted about paring down and keeping things simple (which also helps top up the ol’ travel fund). And since we still can’t help but cling to our pennies, we thought sharing a few more of the things that save us the most money might help our readers too! Stay Check it out here!

Further reading

  • Million Dollar Journey: Educational articles regarding personal finance and investing
  • Saving for Travel: Outlines a simple, step-by-step, common-sense approach to saving for travelling. No scams. No get-rich-quick schemes. Just a tried and tested approach written by a budget backpacker for other backpackers.
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About the Author ()

For nearly ten years now, Daniel of Two Go Round-The-World has explored how travel captures our imagination and engages our deepest emotions. One half of the duo that maintains the widely read Two Go Round-The-World blog, Daniel treats his subjects not only as works of art but also as symbols of the cultural and political forces that inspire them. Check him out on Google+.

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Sites That Link to this Post

  1. Wednesday Links « wanderoverhere | September 23, 2009
  2. Paying For Your Trip – Credit Card vs Savings « AirTreks Blog | December 17, 2009
  1. Lisa Bergren says:

    I’m following your story with interest, because we are (a) about to relaunch as a blog and (b) we are kicking around taking our family of 5 on the road for a year! Anything we can glean from your prep will be a boon for us–including figuring out finances–thanks for sharing.

  2. Outstanding post, I think that to save money for traveling has to be a priority for those of us whom enjoy a trip to other country once in a while, and it also serves to get accustomed to save money for general purposes, so, twice the positive

  3. Leo says:

    If your looking to save for your trip and live in the UK, how about a ISA account. They are tax free and your money is safe!

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