4 feet 2 mouths

Trip Tip #4: How to Finance a Year of Travel (by Nathan)

Step one- get a hand full of money!

For the fourth installment of our travel advice series, we decided to tackle a big one, the question that everyone is thinking about- How do you pay for a 14 month adventure?  It is not easy, but it is possible for anyone that is committed to the journey of a lifetime.  In the big picture there are costs of travel that are somewhat predictable; the challenge relies on funding the trip and reducing expenses everywhere possible.

Check out the entire travel advice series for all the information you might need before setting out on a trip of your own:

• TRIP TIP #1: Letting go is easier with a good travel companion.
• TRIP TIP #2: Pack what you need and need everything you pack.
• TRIP TIP #3: Plan early and leave room for spontaneity.
  

Let’s start the pre-planning.  The seed is implanted- you are going to take a yearlong around-the-world trip.   Better start saving.  Make a rough guess at your grand plan.  Separate the places into three categories, expensive ($75-125+ per day- western countries & South America), Average ($40-50+per day- SE Asia & China) and Inexpensive ($25-30+ per day- India).  Create a rough estimate of cost, say $75 per day including visas and flights; now refine that number based on the number of weeks in each type of country listed above.  Now we have a number for the whole trip.

Now, we can start saving.   The necessity here is that 1) you have a job and 2) your earn more than you spend.  Long ago, several years now, Carmen and I decided to prioritize our savings for this long-term trip. Major life decisions such as buying a house, a new car, or having a pet were considered.  For us, we put those things on hold because seeing the world was that important.  Travel around-the-world will definitely make a dent on your nest egg but I promise you, it is well worth it.  Numbers are not for everyone, but some simple budgeting efforts will help you save and spend while traveling.

Our pocket expense book

We keep track of our money while traveling in two ways.  The first is a spreadsheet or list that tabulates each ATM transaction, credit card payments and conversion rates.  The second is our pocket calendar that we write down what we spend each day (this is only necessary if you want to know exactly where your funds are going – otherwise you can just watch your spreadsheet).  We sum our outgoing expenses every week to answer the question “are on budget?”  If you have finite funds, you’ll want to pay attention closely so that you have enough money to actually make back home.  Think of travel in number of dollars per day.  If you are doing really well, then adjust for more time in expensive countries, if you are over-budget then slow down and travel more in the inexpensive countries.  Having a good bank will also make it easier to save money.

BANKING- Get a bank account that covers ATM transactions at non-bank ATM’s.  We found out this the hard way with over $300 in fees in South America.  We traveled in Europe, India, SE Asia & China for twice the time and we only spent $75 in fees.  This happens because the bank abroad charges a fee, the US bank charges a fee then there is a 1% transaction by MC/Visa.  Online banks do not have physical ATM’s of their own so they cover the transaction cost issued by the ATM.  We have been using Scottrade because it allows a pretty seamless transition to selling off portions of our nest egg into money to be withdrawn.  With Scottrade we have been able to keep fees at about 1.5%. Bring at least one other bank card, one from a big bank, not to use, but just in case your no-fee one is not working.

MasterCard Conversion Rates for July 5 – USD

Do some research on which ATM’s to use.  Some banks are very dodgy, they charge a fee to use the ATM, but then they also try to slip in an added 2-3% conversion.  Scottrade typically only reimburses $3, so you have to avoid these dodgy banks.  Use Techcom in Vietnam, Bank of China in China, and BCEL in Laos.  Europe seemed pretty standardized.  Do not use HSBC unless you already bank there, they charged me $9 for withdrawing $250 in Vietnam.  You can track the currency conversions on Google, but I like the MasterCard conversion tool.   Thailand ATM’s are horrible, they are prevalent, but most of them are owned by currency exchange houses.  This means $6-8 every time you withdrawal money.  I suggest you run a Google search (such as: site:www.lonelyplanet.com/thorntree best ATM Thailand ) before you enter a country to get the most up-to-date discussion.   If at all possible, minimize your ATM pulls by using a good credit card.

CREDIT CARDS – Most banks will tack on a fee and a 1-2% conversion which can get expensive when you are spending a few thousand dollars every month.  Get a credit card that does not have a foreign transaction fee. And use it at all possible transactions, there is no better exchange rate.  I like my Capital One cash card; Chase offers a sapphire preferred card that has some enticing initial rewards & no foreign fees, but an annual fee after a year. Find one that suits your needs and maybe you can get a bonus out of it.  Bring a spare card just in case and never let your credit cards go overdue.

The last 18 months could have earned you 25%!

INVESTING- there is no reason that your money should be sitting stagnant while you travel.  Savings accounts and money markets are not going to make you anything; CD’s lock your money into a long-term contract that does not allow you to access it.  Now, I am not your financial advisor but here is my personal opinion: invest in the stock market. I think high-dividend stocks from blue chip DOW companies are reliable for a decent return on investment.  Another option would be to invest in an index fund that has little overhead cost.   A good resource for financial advice is Motley Fool.  The reality is that I am not a day-trader but some businesses are making lots of money out there, regardless of the economy, and I am happy to let them fund my vacation.  Even if we make just 5%, it may be $2,500 and a month of travel expenses.  We recommended a Scottrade bank account, but their main operation is as a brokerage offering $7 trades.  It is very useful to sell a stock and have the money available within a week.  Try it, understand the risks of investing and hopefully it will work in your favor.

The final leg in financing a year abroad is to get rid of all your expenses.  You are wasting your money if you are paying for car insurance, car payments, domestic health insurance, phone bills, rent or a mortgage while you are traveling.  You will be much happier not worrying about all that crap anyway.  If it does not help you on your trip, then scrap it.

I understand that it is an enormous effort to afford and actually execute a trip like ours.  There are the costs of travel that need to be kept reasonably under $50 per person per day for everything.  There are the expenses left at home that should be $0.  And all this without any real income.  It can be done through careful planning, moderately paced travel and being observant of an ongoing budget.  We recommend that you fund your big trip with several years or months of dedicated saving and investing.  If we can travel around-the-world, then almost anyone can, just commit!

Trip Tip #3: Five Steps to Making the Grand Plan (by Carmen)

Where are you going?

This is the first question to ask yourself as the idea of travel transitions from fantasy to reality. The world is full of beautiful and intriguing places to visit so the answer to this simple question is never easy. Yet it’s an essential part of the travel planning process, or what I like to call making the Grand Plan.

TRIP TIP #3: Plan early and leave room for spontaneity.

Managing travel logistics is the less sexy side of exploring the world – a tiring but necessary coordination of details. At times it can all seem overwhelming. But there are steps that I use to make the process go smoothly. The key is finding a balance between planning too much and too little. Plan too much and you miss out on things you learn about by talking to people along the way. Plan too little and you spend a lot of time abroad figuring out your next step instead of exploring. Your personal balance will be influenced by travel style and length of trip.

Me checking out my guidebook in Tokyo (2009)

Travel is so personal. That’s why I consider myself lucky to have found a partner with a similar travel style. We aren’t exactly the same – Nathan loves to push himself to see and experience as much as he can, while I like a slightly slower pace. But for the most part we have found a happy middle ground.  I wrote this post as a sort of summary to how we plan our travels. I like to have a general itinerary of countries I’m visiting as well as an end date. I really value having an overall plan as it gives me peace of mind as well as events to look forward to along the way.

For Claudia, an inspirational person and adventurer

Yet some people prefer the complete opposite. They want total freedom to go wherever they fancy along the way, returning home at some unspecified time in the future. Such was the case with Claudia, a wonderful family friend who left her home in the UK and never really made it back. Instead, her travels eventually led her to settle in Los Angeles, where my family and I enjoyed her company for almost two decades. Claudia recently passed away and since then I’ve heard stories about how she would buy a one way ticket somewhere, have very little money and expect to be able to work her way back home. At this point in my life I feel that I could appreciate her travel stories more than ever. I regret not learning more about her journeys and adventures before she left us. But her courage to travel reminds me to push myself too. To approach places with an open mind and sometimes even an open-ended ticket.

So without further ado, I present the 4feet2mouths method for creating our Grand Plan.  May it help you in determining your own balance.

Our notes on scrap paper of all the places we’d like to go after South America

Our trip planning map with red “must sees” and blue “like to sees”

1) Map your “must sees” and “like to sees” – The most important (and fun) step.  First list all the countries and places you know you want to visit. Then consult friends and guidebooks, specifically the suggested country itineraries within the books, to get a sense of a country’s highlights. Narrow to a list of “must sees” versus “like to sees.” From there, it is super useful to have all the points of interest mapped out. I like to use the “My Places” function on Google Maps. I color coded the must sees vs like to sees then played a game of connect the dots. Soon enough a pattern will emerge that can become your route. Note: the same is true of planning within an individual city. Mapping always makes figuring out the days activities much easier. Be sure to pick up a city map at the airport or bus station you arrive at – they’re not always easy to find once you get to the city center.

Our first draft calendar for the Big Trip

2) Draw a rough calendar – After reviewing the cities and places along your route, assign an amount of time in each and compare that to how much time you have overall. Chances are you won’t have enough time to see it all, in which case you have to cut either time in each place or the number of places you visit. Brutal, I know. We had to cut out Italy and Croatia and Morocco and Egypt and Nepal and…well you get the idea. But we knew we couldn’t part with Greece and Turkey. Here is an example of my calendar process for those two countries: “I want to see a couple islands, with at least three or four days in each one, so at least a week for that. I’ll have to fly into Athens anyway so I have to reserve time for the city as well. Let’s just say 2 weeks for Greece. I can take a boat to Turkey and if I work my way up the coast that could take a week. Then I want some time in Istanbul so lets say at least two weeks in Turkey too.” Finally, put all this info on a calendar. This helps give the trip some structure without being overwhelming to plan all at once.

First flight by the Wright Brothers, 1903 (photocredit: Wikicommons)

3) Buy your major flights – Almsot everyone has to buy at least one flight in order to start their travels.  I use Kayak as my first step to finding flight prices, except in China where Ctrip dominates. I do not have any real tricks to finding good prices; they an go up $100 one day and then go on sale the next. I find this to be one of the more frustrating parts of travel planning – you just have to be diligent and patient and hope for the best! If you are long term traveling you will have an additional consideration: a ’round the world (RTW) package versus individual flights. Be sure to compare your options. We ended up saving thousands of dollars by purchasing five individual flights to make our way around the world instead of a RTW package. Of course, there is the third option – no flights at all! For true travelers cred you can cross the globe completely overland and oversea. I heard of this, but we did not meet people doing this. It sounds legendary.

Our room at one of our favorite hostels ever, The Travellers House in Lisbon. Staying here most definitely required advanced planning. (2009)

4) Locate ho(s)tels – I’ve heard that most things in life can be only two of these three categories: good, fast or cheap.  This is definitely true of figuring out where to sleep.  The cheapest way to get a good night’s sleep is Couchsurfing.  This comes with the added bonus of being immersed in a culture and connected to a broader traveler’s network full of some of the friendliest people ever.  Our experiences Couchsurfing in Athens, Rhodes and Hong Kong were awesome but required time to set up.  (Sidenote: Check out this photographer’s year spent couchsurfing, especially the ones on grandmas’s cooking – complete with recipes!)  Time is also required to set up AirBnB, a great way to get a deal as well as a taste of local life.  Whether you’re planning ahead or at the last minute I love using Hostelworld for the honest reviews.  At the very least, look up where a few hostels are in the guidebook before you arrive so that you’re not at the bus station looking clueless while touts shout at you.  We’ve done all these methods – from planning ahead to walking around town looking for a bargain.  Again this comes down to personal choice but, for me, I despise that time wasted looking for a place. Especially if it turns out to be a holiday and everything is full.  So my advice is to plan ahead if you can (especially for bigger cities) and know as best as possible where your hotel is.  Nathan and I would embark on the Great Hotel Search upon arriving at a place and occasionally failed.  Maps or directions can be wrong, there are rarely street signs.   Every bit of information you can gather helps keep your sucess rate high.

Vamos Spanish Academy Worksheets

5) Find food and fun – Here we come back to the exciting part of travel planning!  There are some things that are best to plan ahead, such as volunteer opportunities or work programs, in order to really find an organization that suits you.  I was also happy that I took the time to research and compare language schools in Buenos Aires.  Vamos Spanish Academy was a fantastic experience with great staff and students.  The rest of it you can probably wait to figure out there but I know I have a hard time resisting scrolling through local food blogs, drooling over my potential future meals.  I generally find  my blogs by searching Google, clicking the “More” tab at the top and selecting “Blogs.”  Blogs eventually lead to other blogs and you’ll have some great recommendations before you know it.

I repeated these series of steps on various scales (country, region, city) many, many times in the past year and a half.  I’d take advantage of bus rides or down time to do some reading and planning.  Being diligent helped free my time in the cities we visited in order to just enjoy myself, eat well, take pictures and share it with all of you!  Whatever your personal method, these logistics all work out in the end.  The most important thing is approach travel with an open mind and open heart.  As you take your journey also let the journey take you.  As Claudia demonstrated for me, you never know where you might end up.