Have you made plans to travel before, but failed to follow through? Did you want to stick to a travel budget but didn’t manage and ended up spending more?
As the organized traveler that I am, the travel budget is one of the key aspects of my trip planning. And I am always looking to improve the way I do things both personally and for my business.
A friend recently recommended a software program called YNAB You Need A Budget (no affiliation) which deals with budgets and expense tracking.
I’ve been using YNAB (why-nab) for the past few months with fantastic financial results and now I want to share with you how you can use it when it comes to travel.
What is YNAB?
YNAB is a personal finance software program for both PC and Mac. It also offers iPhone and Android apps for expense tracking on the go.
Basically, you set up a monthly budget and then you track your expenses regularly, based on categories and sub-categories that you have defined
The four rules
YNAB is more than just the software. It’s an entire philosophy based on four rules:
Rule 1: Give every dollar a job:
It means that when you receive money, you assign that money to a certain expense category (food, utilities, medical expenses, transportation, etc).
Rule 2: Save for a rainy day:
It refers to expenses that occur outside of your monthly expenditure, such as insurance premiums, unexpected car maintenance, buying a new house or yes, of course, travel!
Rule 3: Roll with the punches:
Meaning that whenever the estimate values you had budgeted at the beginning of the month are no longer valid because circumstances change, you can adjust right then and there.
You sacrifice spending in some categories and add that amount to the category that is needing it the most right now.
Rule 4: Live on last month’s income:
The idea here is to save enough liquid cash to pay for an entire month of expenses, without any money rolling in for that month. Quite the achievement!
Photo: Flickr, Barrybar. Click here to go to the original image.
One of the things I love about YNAB is their extensive support material, so if you’d like to know more about how YNAB works, here are a few resources:
You can join a free online live class.
You can see past classes materials.
You can head over to their support page to find more video tutorials and articles.
You can join the 9 day course sent to your inbox.
YNAB and your travel budget
There are two ways in which YNAB is an amazing tool when it comes to the travel budget:
One, saving up for travel
Travel is in many people’s wish list of lifetime dreams to fulfill, as much as buying a house and having a family.
And yes, travel does come with (sometimes) elevated costs. But travel is not something you spend on all the time.
In fact, what I recommend doing in my free guide How To Plan Your Trip is that you start creating your travel wish list well in advance, even years, and accordingly, start saving as soon as you can.
With YNAB’s rule 2, saving up for a rainy day, travel becomes one such rainy day, namely, an expense that is outside of the monthly expenses.
How to save for travel with YNAB?
Rule 2 teaches us to budget a certain amount of money each month, to achieve the target amount when payments for the trip are due.
For example:
You’ve estimated that your trip to Barcelona will cost you about $3000. But you don’t have the money right now.
The next question would be: when do you plan on going to Barcelona? 6 months, you could say.
Ok, then you need to save $500 a month so that in 6 months, you have enough to pay for your trip.
You could even say that you only have 5 months to save, because you’ll start paying for airfare and hotels about a month before. That would be $600 a month you need to save, then.
I suggest you set up a category in YNAB called “Rainy Day Funds” and a sub-category called “Barcelona”.
Each month, when income is received, you budget $600 to your “Barcelona” sub-category and then, you just don’t spend it.
That’s right, every month you don’t spend (thus protecting) the $600 you’ve budgeted for your trip, that money is adding itself up in your bank account for when you need it.
In this way, you have a systematic, disciplined and effective way of protecting and making sure you set aside the money to fulfill your dream.
I’m going to end it here for today, so that we can meet next time and I’ll show you the second way in which YNAB is useful to manage your travel budget.
The advantages of sticking to a budget
Even if you don’t use YNAB, the principles are sound and can be used with many applications, including your simple Excel spreadsheet.
Protecting the money for your travel inside your monthly budget will ensure that you make your travel dreams come true.
You don’t need to get into debt in order to travel, you just need to set your priorities straight. Maybe this month you don’t spend $300 on new clothes, maybe you eat out a bit less.
YNAB will help you make informed decisions and take the stress out of the financial aspects of your life.
By the way, I have no affiliation to YNAB, it’s just an app I use and I like and I think it can be useful for you too!
Do you save money for your travels? How?
Have you gone into debt before, to fulfill a travel dream?
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