Financial Tricks to Save Money Traveling

From budgeting to credit cards: a how-to financial guide

Traveling, to many, seems completely unattainable. I am here to tell you the opposite. Anything is possible if you set your mind to it, especially if there is a passion and a dream behind it.

Financial Planning

I know the term "financial planning" may seem intimidating. It was to me at first, too.

This sometimes complicated process can be broken down into a simple process: how badly do you want to travel abroad? And secondly, how much money are you willing to spend on it?

For me, this question was answered by: extremely badly, and thousands (and thousands) of dollars. However, these tips can be easily applied to traveling even if you're not ready to break the bank.

Budget, Budget, Budget

How much you put away in your travel stash is different for every person, and always flexible.

Typically, it is advised to split you income into the 50/30/20 rule. Fifty percent of any given paycheck should go to necessities: rent, food, insurance, bills, and everyday essentials. Thirty percent can be left for personal use: eating out, entertainment, etcetera. The last twenty percent is advised to go into savings, emergency funds, or personal investments.

My personal advice would be to cut down on the thirty percent of personal spending. To be completely candid, I also used completely the other twenty percent of my income to save for travel. Anything that was not rent or absolutely essential went into a travel savings account. That being said, everything about financial planning and saving can be completely personalized, and you should always do what makes you feel the most comfortable and the least stressed.

To give a more specific picture, imagine that you make approximately $25,000 a year. In today's age, this is next to nothing. Despite this, it can still be done as long as the end goal is always in the back of your mind.

In this scenario, you're making approximately $2,000 a month. Let's be generous and say that your rent is only about $800. Groceries for the average person will usually fluctuate between $250-$550, we'll be optimistic and assume you're only spending about $300.

This leaves us with about $900. Let's say $150 goes towards your personal saving/emergency fund, and, let's be realistic, you'll spend at least $150 going out to bars, having fun with friends, etc. This financial plan to travel isn't supposed to make your life in the meantime miserable, by all means, you'll need to save some money for fun along the way or the saving process will start to become something you resent quickly.

This brings us down to a hypothetical $600. My advice would be to take this money and put it in a separate bank account you have designed specifically as your dream fund - don't touch it, no matter how tempting it may be.

If you repeat this process for a short 6 months, you'll have $3,600 at your disposal for a trip of a lifetime. If you save for a year, you would have $7,200. Repeat this process enough, with any amount of money, and you will see the account growing in a very exciting way.

Adventure awaits!

Credit Cards: Friend or Foe?

The short answer: friend.

This next section will be about some general advice, but also some precautionary tales about my own experience.

Perks

Credit cards, in general, I believe are a very useful tool when it comes to being financially literate. However, when it comes to traveling specifically, I would say it is an integral part, or even an essential part of your planning.

No Foreign Transaction Fees

The biggest perk of credit cards while traveling outside of the United States is that they (for the most part) do not have any foreign transaction fees. I would never advise to get a card with any sort of fees, for nearly any reason. Make sure when applying for cards that there is also no annual fee associated. There are plenty of deals out there that will offer you great cashback without any money coming out of your pocket at all.

Foreign transaction fees are commonly used by banks to ding you for making transactions outside of the States. It is standard for the bank to charge you about 3% of a purchase abroad if using your bank issued debit card. Now, this isn't so much of an issue if you're buying something small like a coffee, however it really begins to add up if your debit card is your only means of accessing money.

Every cent counts!

Credit Card Points/Cashback

Let's talk about the other huge perk of having a travel card - cash back!

Throughout my time abroad, I used the credit cards for everything. Putting this much money on a card in a short period of time will accrue you a decent amount of "points". These can be used for dining, entertainment, and often hotel rooms and flights as well. Many cards also have a bonus when you first open the card, such as a $200 bonus if you spend a certain amount within the first months of opening it.

Free money, why not, right?

Amazing, but Be Aware

Potential Issues

In my time abroad I used (and still use) two credit lines: the the Bank of America Travel Rewards Visa Signature card and Capital One Quicksilver card.

The first, I opened before I left for my trip. It was my intention to use it for all of my expenses I acquired during the duration of the trip, and the latter I obtained when the first one failed to work.

To elaborate, the way that Bank of America confirms your identity, at least in my experience, is through your phone number. If you are staying in a foreign country for a long period of time, you have two options for a phone plan: spend about $400 a month on an international phone service plan, or get a SIM card (about $35 US dollars) for the country that you are living in. My choice was the latter. Unfortunately, this meant that my American phone number was no longer fully serviced.

This lead to issues when I saw a transaction on my Bank of America card that looked very fishy, and I paused the card. Attempting to re-establish the card proved to be very difficult, as the associates at BOA could not verify my identity to even open my account to look at without sending me a text confirmation first.

I spent about 8 hours with 7 different associates attempting to figure out another way for them to verify my identity, and I was told the only way to do so was to go to a Bank of America location with two different forms of ID, and then maybe they could help me.

Shocker - there are precisely 0 Bank of America locations in Florence, Italy.

To save you some reading, the short story is that I ended up getting my Capital One card and using that for the remainder of the trip. Lesson learned: always have a backup!

Careful...

My caveat with all these beautiful things about credit cards is that it can get you into deep trouble if you do not have the funds to back up what you're spending on the card.

Absolutely do not spend money that you don't have. Traveling is about experiencing beautiful things - not ruining your credit score and putting yourself in serious debt.

Be smart - pay off your balance every month in full if you are able.

Just Go for It!

You can do it! These are just two small areas of financial awareness that can save you hundreds of dollars while traveling.

Sit down with a nice glass of wine and go through your expenses: what do you need, what do you not? Write down how much you spend in which categories for a month and survey which areas you are spending the most in. It's quite possible you spend much more than you realize in a given area. Prioritize yourself!

Research which cards you think would be right for you, and begin applying to a few. Just taking the first few initial steps can catapult you well into where you want to be.

It is realistic, it is possible, and if you believe it, traveling the world can be your reality too!