Travel is on hold for the moment. But if you believe that you will eventually hit the road again (as I do), then now is a great time to look at how to save money to travel. It starts with taking a critical look at your spending habits and then figuring out how to drastically cut expenses. Just when you thought there were no more ways to save, this article will help you find extra money where you least expect it; proven tips for how to reduce expenses so you can save the difference, getting you closer to your travel goals each day.
How to Save Money For Travel: The 5-Step Method
First, let’s look at the big picture. These five inter-related elements will help you transform your finances into a travel saving machine! Not all five steps may be necessary (for example, you might decide you don’t need or want to do Step 4); customize this template to make it yours.
1. Track Your Expenses
Glib as it may seem, you must know where you’re starting in order to figure out where you’re going. Understanding exactly how you spend your money is essential.
I use a travel-friendly expense tracking app into which I manually input every dollar I spend and assign relevant categories for analysis. I do it as soon as I spend the money, and I don’t judge myself: I just enter the expense. Some people prefer using programs like Mint that link up with their bank accounts and credit cards and track their spending habits automatically. Do whatever works best for you, and whatever you stand the greatest chance of maintaining. This is a long-term exercise; I’ve been doing it for decades.
At the end of each month, take a look at your expenses. Are there any surprises in there? Anything higher or lower than what you anticipated? Only when we see our expenses from a bird’s-eye view, can we decide whether the things we’re spending our money on are ultimately worth it.
2. Create a Monthly Expenses List, and Reduce Fixed Expenses
Once you’ve tracked your expenses, you have a starting point. Look for patterns in your spending and create a monthly expenses list (include weekly expenses by multiplying them by four). It doesn’t have to be an exact figure; ballparks work for slightly variable expenses such as utilities, which can fluctuate.
Then, take a look at these monthly expenses. This includes rent/mortgage, utilities, transportation costs, loan payments, subscriptions, and recurring charges. The second half of this article will show you how to cut expenses like these in creative ways that you might not have considered.
3. Eliminate Unnecessary (Discretionary) Spending
Every budgeting article hammers on about this, so I’m not going to. In short, this step involves taking a critical look at every dollar you spend. That morning latte on your way to work every day for a year could translate to two weeks in SouthEast Asia (flights not included). Everything adds up, like eating out, drinking alcohol in bars, and all those harmless little one-off expenses that individually seem innocuous until you tally them up.
You don’t have to cut everything out; but make sure the discretionary expenses you continue with are worth it to you and your quality of life.
4. Earn Extra Money
Your travel savings plan can be accelerated by bringing in some extra money. From moonlighting with a part-time job, to selling stuff you don’t need any more, to freelancing on the side, to creating a location independent career that can eventually support a long-term travel vision, how you earn your money depends on you. This step is entirely optional, and depends on your situation including your travel savings goals and time frame.
5. Save Money in a Special Account
Don’t just let your savings from the hard work of cutting expenses get absorbed into your life. Calculate every dollar you’ve saved in reducing your expenses and specifically set that aside in a special savings account.
How to save for a vacation? Make it easy by setting up an automatic transfer of funds every week or month. Transfer it from your bank account into a high-interest savings account. The rate of return won’t make you rich (by any measure), but it is a great vehicle to set aside money in a guaranteed investment and allow it to grow at a higher rate than your bank account.
And don’t forget about your emergency fund! Learn how to save for travel with travel savings account suggestions, guidelines for your emergency fund, and many more critical elements of your travel financial plan (including how to save money each month) here: The Ultimate Guide to Financial Planning for Travelers
How to Drastically Cut Expenses: 5 Creative Ways to Reduce Fixed Expenses
While they may be called fixed expenses, they aren’t so fixed they can’t be reduced or even eliminated. Here’s how to lower bills and common recurring expenses in creative ways you might not have considered so you can save up to thousands of dollars each year.
Now, if you’re new to the game and don’t know how to drastically cut household expenses, take a peek at some of the more common expense-cutting suggestions (that you’ll find all over the web), such as:
- Sell your car (if possible)
- Stop eating and drinking at restaurants and bars
- Bring packed lunches to work
- No more fancy lattes
- Go easy on the heating/air conditioning
- Reduce power bills with energy-efficient bulbs
Below are some additional cost saving ideas that aren’t quite as common but can save you up to $4,000/year.
Ask “How Can I Save Money on My Phone Bill?”
Great question! Renegotiate that puppy. First of all, I’m assuming you’ve already done away with your landline and that we’re talking about cell phone bills here. But if you still have a landline in addition to your cell phone, then step one is getting rid of that old clunker.
This strategy works best when your cell phone plan is up for renewal if you’ve been on a contract. As the contract ends you’ll have paid off your phone, and assuming it still works fine and you don’t need a new one (read between the lines here: don’t need a new one), then you don’t need to be paying the same monthly rate for your cell phone plan.
When you’re not locked into a contract, the phone company knows full well that you could take your business elsewhere, so they’re usually willing to offer you a deal (also known as a retention offer). Even if you’re in the middle of a contract, some phone companies can flex to meet your needs, but you won’t have as much leverage since it’s more difficult to change carriers mid-contract.
Before you pick up the phone, ask yourself what you want out of the deal. What is your best-case scenario? More perks? Or less cost? What features don’t you make full use of, and what do you tend to max out? Once you become clear on what your ideal cell phone plan looks like, call in and simply ask them what they can do for you, and take it from there. Literally. Start with “how can I save money on my phone bill” and see what they come up with.
If you really want to save a pile of money on your cell phone bill, you could get extreme like I did and cancel it entirely, and go with a super-cheap online phone number through Fongo or Hushed or Google Voice and then just use a data sim card to have connectivity whenever you’re not in WiFi range. With this system, I pay approximately $200/year for all my phone and data needs, at home and around the world.
For more about this, check out Cell Phone Travel Basics: International Phone Plans, SIM Cards, and More
Potential Savings: $250-$1,000/year
Renegotiate Your Credit Card Annual Fee or Interest Rate
In the name of accumulating frequent flyer miles and travel hacking, I tend to have multiple credit cards on the go at any time. And most of these cards have annual fees, in return for various travel perks from generous sign-up bonuses to free checked bags to lounge passes, companion fares, and more.
Regardless of whether you have travel credit cards or credit cards offering other perks like cash back, ask yourself whether you’re getting enough value to justify the annual fee. Could you downgrade to a fee-free card? If not, that’s okay; just determine which cards you want to keep for sure.
Next, cancel the cards you no longer want, or ask the bank to switch you over to a fee-free card so you can keep the credit open and available in case you want to switch back to their premium card later on without having to re-qualify.
Lastly, for the credit cards you want to keep, call in and ask if they can offer you an incentive to keep the card, insinuating that you’re considering canceling. They may or may not be able to help, but it doesn’t hurt to ask. I’ve have had the annual fee waived on two different credit cards when I simply asked.
If you’re dealing with big credit card debt, but you also pay your bills on time every month and have a decent credit score, you might be able to ask them to reduce your interest rate so you can pay off your debt more effectively. Here’s a great article on how to do that.
In the market for a different travel credit card and not sure where to start? Travel Freely is free and provides customized recommendations.
Potential Savings: $100-$300/year
Eliminate Unnecessary Apps and Subscriptions
Consumer spending on mobile apps is well over $100 billion per year (2020 is projected to hit almost $200 billion). Are you making the most of the apps you’ve paid for, as well as the ones you continue to pay for?
Make a list of all the subscriptions you have. Did you sign up for an app that you used all the time a few months ago but have since lost interest in? Are you using Spotify enough to justify it? Do you have multiple cloud storage accounts? Make sure you don’t get charged for services you’re not making the most of. This also applies to membership websites and Patreon subscriptions. Here’s how to see what apps and pre-authorized payments you have so you can manage your digital subscriptions.
Potential Savings: $20-$300/year
“How Can I Reduce My Cable Bill?” Consolidate Streaming, Cable, etc.
Personally I haven’t had cable tv for decades, but I’m probably not the norm. Call your cable company and (similar to your phone company) literally ask them “how can I reduce my cable bill?” See what they come back with. And honestly if they don’t reply with something reasonable, consider canceling your cable altogether. With a digital antenna, you can catch a bunch of free channels and stay apprised of any news or topical information you need.
Also, do you really need Hulu, Netflix, Disney, HBO, Amazon Prime, and every other streaming channel? Probably not. Even if you’re a watch-a-holic, you could probably reduce your streaming and cable subscriptions down to a maximum of two at any one time. Decide what you use the most and what can go. You can also alternate: one year of Netflix, the next year of Hulu.
Also, ask your friends and family what services they have. Maybe you can combine your efforts and share your subscriptions with one another.
Potential Savings: $50-$800+/year
Cancel or Renegotiate Gym Membership
Most gyms have frozen their customer accounts during the closure. And many people have found alternative creative ways to work out. I have tapped into the abundance of free YouTube workouts and put my 10 pound weights to work. Other people are going for walks or runs.
Now is your opportunity to consider whether that gym membership brings enough value into your life to continue paying for it when it reopens.
Potential Savings: $600-$1,600/year
How to Lower Monthly Bills and Not Waste Your Efforts: Add It Up and Save the Difference
If you started reading this article wondering how to save money for travel, hopefully now you’ve just uncovered a bunch of money in your budget that can be redirected. Reducing or eliminating above five fixed expenses could save you $1,020-$4,000 a year! At the upper end, that’s over $330/month that you can automatically direct towards your travel savings fund, which in and of itself could fund a pretty nice annual vacation.
If you add in the other elements of the 5-step travel savings plan outlined at the beginning of this article, you could easily double this savings amount.
And if you get creative about how you spend your money on travel (for example, I’m all about getting accommodation for free), then your travel savings will go even farther once you hit the road.
But here’s the trick: it’s all give and take. Figuring out how to lower monthly bills and reducing your expenses is all well and good, but it’s a futile exercise if you don’t direct your savings to a goal that gets you excited, like (in the example of this article) saving for your next travel adventure.
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How Much Money do I Need to Travel The World? Great question. Read this: How to Create a Long-Term Travel Budget