Creating a Budget: Better Money Management for More Travel

Find out how to budget your money so that you can start living the life you’ve always dreamt of living.

Everyday we deal with money and yet very few people truly understand their finances. Creating a budget will not only allow you to see where your money is going, but it is also a critical piece of staying on track financially.

Let’s take a look at how to set up your budget step-by-step to get you closer to your goals – whether its traveling the world or buying a house!

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Table of Contents

How to Build A Budget

We’ll be taking a look at a step by step guide to get you started on creating a budget. This process will help you realize where you truly stand financially and how to proceed toward financial freedom.

Step 1: Decide where you want to track your expenses

To keep your budget up to date, you need to track your expenses in a way that works for you. There are a lot of different options for this from manual to automated in an app. There are different benefits to budgeting in each, but the most important part is to pick the option you are most likely to use and reference regularly!

Manual Budget Tracking

I first started budgeting using Excel. It is easy to use, and if you work at a computer everyday or are in school and use a computer everyday, it is super accessible. Excel also has great capabilities like adding multiple tabs to track each month on its own page and useful equation capabilities to give totals and percentages. Once it is set up, you simply go in and pop in the numbers.

Another option is to put it into Google Sheets or to share your Excel spreadsheet in Google Drive so that you can access it on your phone or your computer.

While manual tracking may seem pretty labor intensive, it is pretty simple and painless once you get into the habit. And, as a bonus, by seeing every expense come in and every bill go out, you will truly understand your budget at a granular level.

Consider an App or Program

These days there are a lot of free apps for budgeting. My personal favorite is Empower. It allows you to track your overall financial health by connecting your accounts, including your credit cards.

The perks of using an app include:

Seeing all of your accounts in one place, in real-time, without any manual upkeep

Help understanding what hidden fees you may be getting hit with

How close (or far) you may be from retirement

Receive $20 just for trying Empower

Step 2: Determine which categories your expenses fall into

To start setting up your budget, you need to come up with a number of different categories to classify your expenses under. If you have chosen to manually budget, these categories are completely up to you. If you have chosen an app, there are a quantity of categories that are already available. You can reassign expenses as needed to truly customize your budget.

General Budgeting Categories

To give you an idea of how to categorize your expenses, I here are the ones I typically use. If you have any group of expenses that hit regularly, like house projects, they may deserve their own category.

Income: This includes any money coming in like my salary, any odd jobs, monetary gifts, bonuses, etc.

Restaurants: This includes any time I go out to eat.

Grocery: This includes all of my the food I buy to make at home.

Going Out: This includes any evenings out, happy hours, alcohol I buy for at home, etc.

Car: This includes any and all of my car expenses, like insurance, car payment/lease, gas, maintenance, etc.

Utilities: This includes rent and other bills, such as water, cable, phone, trash, etc.

Shopping: This includes any shopping I do for non-food items, like personal hygiene products, clothing, shoes, house decor, etc.

Travel: This is where I track all of the money I spend on flights, hotels, etc.

Other: This includes any odds and ends like going to the movies, concerts, skydiving, gifts, hair cuts, doctors visits, gym membership, etc.

Description: This was my only non-monetary field and it simply was used to jot down what some of the expenses were for as an FYI.

These may not be the budget categories you choose. It all depends on what your main hobbies and expenses. For example, while in school I tracked my school expenses and while living on the road, my categories were completely different.

On the Road Budgeting Categories

Here are the budget categories I have used while living on the road. They help me get the full picture of what I am spending and where my money is going, which is critical when traveling on a budget!

Food: This is for any time I eat, in or out ,since living on the road forces a change in eating habits.

Transport: This is all of my transportation expenses whether it be taxis, buses, planes, car expenses, etc.

Accommodation: This is the cost of wherever I am staying, like hotels, hostels, camp grounds, AirBnBs, etc.

Activities: This includes any “fun” things I do, like tours, adventure or outdoor activities, like boat rides, hang gliding, national park entry, etc.

Shopping: This includes any thing I need to buy while on the road, such as souvenirs, new clothes or shoes, shampoo, bug spray, etc.

Going Out: This is for alcohol, bar, or club entry expenses.

Other: This is my catch-all category for things like storage fees, gifts, phone, etc.

Now that you have the categories for your budget, it’s time to start the actual budgeting process!

Step 3: Start tracking your expenses

Once you have the framework set up, start tracking everything. All money in or out should be tracked. This will give you the full picture of your total income and expenses.

If you are tracking your budget manually, every day or so pop in your expenses. It’s super easy to visit your credit card, utility companies, and bank accounts to find the specifics if you happen to lose track. Just don’t forget to include anything you might have paid in cash.

If you are using an app, it will be done for you! Of course, you will then need to take a look at the budgeting tab and see how it has categorized your expenses, and you may have to reassign some of them to new categories.

Why Tracking Your Expenses is Helpful

This part of the budgeting process is critical in understanding the baseline of your finances. Are you spending more than you’re making? Is your shopping category super high? Are you dining or drinking yourself into a financial hole?

During this budget process, you will also be able to identify your:

Fixed costs: These are the costs that remain pretty constant and cannot be avoided. This could include rent, car payments, school loans, etc.

Variable costs: These are the costs that may fluctuate based on your daily choices, like shopping, eating out, vacations, etc.

Savings or over-expenditures: This is the difference between your income and expenses each month.

Categories where your spending seems unreasonably high.

The percent of your income that is going to expenses in each category.

Step 4: Set up your target goals and start creating a budget you can follow

After a few months of tracking your expenses, you will get an idea of your spending habits. This may be a big lightbulb moment when you realize you are spending 25% of your income on eating out, drinking, or constantly keeping up with the fashion trends.

Whatever your findings are, its time to start setting goals and creating a target spend for each category. Maybe you want to limit your eating out to $100/month or cut your shopping habit down by 50%.

These goals will vary based on how your expenses currently stand. Are you overspending and need to cut back? Are you saving how much you want to be saving? Customize the goals for your lifestyle, and be realistic!

Recommended Budget Guidelines

To give you an idea of where to start creating your budget, here are a few “expert” recommendations. They are standard guidelines to help you see how you stack up and what you should be aiming for.

The 50/20/30 guideline: 50% of your income should go to fixed costs, 20% to financial goals or savings, 30% to variable costs.

You should be spending 25-30% of your income on the cost of your housing, whether it be a mortgage or rent.

You should be saving 20% of your income, including any employer match.

How to Set Your Own Budget Goals

Start by looking your income. You obviously need to be living within your means which varies greatly across the board.

Then plug in your fixed costs. This will include your housing expenses as well as other bills you need to pay, like student loan or car payments, phone bills, utilities, etc.

The next thing to consider is your savings goal. While typically this would be saving to put money into your savings account for emergencies or retirement, there are so many other reasons you may need or want to start saving, like paying for a wedding, planning an epic trip, or buying a house. Whatever you need to save the money for, you need to factor it in if you want to plan for it.

From there, you will come up with what flex money you have remaining for variable costs. This is when you can start setting target expense goals for each budget category.

This process will help you prioritize your spending to understand how much “fun” you can truly afford to reach your goals. For example, food is a necessity, but maybe you want to spend less eating out and more at the grocery. Write it down. Hold yourself accountable.

Maybe you can no longer fit some of your hobbies into your budget. Work with it until you get in a place you are comfortable with. This may mean decreasing your savings goal and taking longer to reach your goals or even finding ways to lower your costs, like searching for a cheaper place to live or a roommate.

2 Example Budget Scenarios

Here are 2 different budget scenarios to help you better understand how it all plays out. We’ll use a modest income of $36,000 and a higher one of $120,000.

Category	$36,000 Income	$120,000 Income
Income	$3,000/month	$10,000/month
25% Housing	$750/month	$2,500/month
25% Other Fixed Costs	$750/month	$2,500/month
20% Savings	$600/month	$2,000/month
Remaining	$900/month	$3,000/month

2 Budgeting Examples Using Recommended Guidelines

(Note that I have not taken taxes out of the income or added an employer match for the savings bucket to keep it easy to follow.)

In these budget scenarios you would have $900/month or $3,000/month to put towards your daily life while hitting your savings goals. Track your expenses and stick to it!

Step 5: Adjust your spending to reach your goals.

Chances are the first couple of months of living on a budget will be the hardest. It is still a learning phase of tracking your expenses and determining what is worth the money and what is not. Feel free to adjust your budget and shift your goals to become something you can keep up with long term. If you won’t stick with it, it’s not going to help you reach your saving goals!

If after creating a budget you are a bit horrified at what you’ve found, it may be time to look at additional ways to save money and keep your budget in balance. Take a look at How to Save Money to Travel to find some key tips to set you up for success. Of course these tips will also help you save money for things other than travel. I just tend to put it all towards travel!

Why I Started Budgeting

So how did I get into the budgeting business? Well, when I was in college (just a few years ago… okay, and maybe a few more), I worked as a waitress, a nanny, and a student assistant at the Alumni Association. I started tracking dollar by dollar my income and expenses to ensure I could cover my bills. With money frequently coming and going in cash, it was really hard to keep track!

Creating a budget became a very eye-opening experience for me, and it helped me know how many waitressing shifts I needed to pay the bills! I have has since continued budgeting through my corporate jobs too.

This budgeting process has enabled me to not only pay my bills but to save some money on the side by being conscientious of where my money was going. This has enabled me to travel, choose to leave jobs if I am unhappy, and not stress about finances.

The Results of My Budgeting

Overtime, keeping up my budget allowed me to save enough to take a year off from work at age 29 and travel full-time around the world for 13 months. (Welcome to my travel blog that was a result of this time off.)

Since then, I have continued to save money and splurge on the things I enjoy most in life… including of course endless amounts of travel.

Everyone starts somewhere, and starting with some of these high level budgeting tips to track what you spend will get you there! Soon you will be managing your money rather than letting your money manage you.

Continue Managing Your Money

Creating a budget is the first step towards financial freedom and pursuing your bigger life goals – whether its traveling the world or buying a house! Continue down this path by continuing to read about budgeting, saving money, and understanding the cost of things like travel:

Happy budgeting!!

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