How to Budget

March 2, 2020

7 Steps to a Debt-Free Travel Budget

By Priya

March 2, 2020

When you’re chasing financial freedom, the last thing you want is to put your life on hold. But you also don’t want to fall back into the trap of accumulating debt. What you need is a debt-free travel budget! By setting a budget for your holiday in 7 steps, you’re preparing your finances for travelling without eliminating your progress towards financial freedom. Because if you take on more debt, your dream of financial freedom slips further away.

I love travelling. Mr Bear and I lived in Germany for 15 months while I was on secondment with my job. During that time we travelled as much as we could afford to. As a result, we visited about 36 different cities across Europe (and I’ll definitely be going back for more!). For each of those trips, I created a travel budget to help keep costs under control and ensure we could afford the travel with all our other expenses.

The ability to travel widely is one of the reasons I’m chasing financial freedom in the first place. I’d love to just pack our bags, hop on a plane and explore someplace new. When I plan ahead and budget for my holiday, it forms part of my overall financial plan. It allows me to travel and live my life now without relying on debt.

Setting your debt-free travel budget

Setting your travel budget won’t be difficult but you will need to know where you want to travel to and what experiences you’re looking for. All it takes is a bit of forethought and travel research. Every travel budget you set will be different depending on:

  • the destination;
  • the experiences you want;
  • how long you’ll be travelling for;
  • what’s important to you when travelling;
  • the time of year you’re travelling;
  • who you’re travelling with.

Before you get started, however, it’s a good idea to have a rough itinerary drawn up which covers each of the points above. As these factors will greatly influence the cost of your vacation, be as accurate as you can but don’t be afraid to make changes when you need to. Keep reading to find out how to budget for a holiday without using debt.

Understand the costs to include in your travel budget


I generally allocate a generous portion of my budget towards accommodation for several reasons. It’s super important to me to find lodging that’s close to the places we want to visit but also feels very safe. I also sometimes like to splurge on accommodation. I’m the type of traveller that likes room service, fluffy robes and a breakfast buffet.

Because, after a long day of exploring, I love feeling pampered. How much you spend on accommodation will depend on where you’re going, how many people you’re travelling with and what you want. It’s up to you whether you choose a hotel, Air BnB, a hostel or another type of lodging. Below are some of the costs to consider for your accommodation budget:

  • room price per person per night;
  • cleaning fees if applicable;
  • cost for breakfast or other meals;
  • dry cleaning or laundry services;
  • costs for additional beds in the room;
  • parking at the hotel (if you’re driving to your destination or hiring a car).

If you’re travelling to a destination where you’re required to leave tips, then don’t worry about that just yet. You’ll need to include this when you budget for a holiday, but we’ll factor tips into your travel budget in step 6.

Flights (getting there)

The costs involved to actually get there will vary greatly depending on how you’re getting there. Costs will also vary depending on your destination and the distance you’ll be travelling. If your vacation includes stops at multiple cities, you’ll need to consider these costs for every leg of your journey.


Below are some of the costs to consider on a per person basis if you’re taking a flight:

  • ticket price;
  • booking fees;
  • baggage costs;
  • fees for choosing your seat;
  • on-board meals and snacks;
  • credit or debit card surcharges.

Throughout our travels in Europe, we encountered a lot of sneaky costs being charged by airlines. The worst was a charge for bringing carry-on baggage. Most airlines allow you to bring a cabin bag and a personal item onto the plane included in the price of your ticket. This airline didn’t.

Beware of hidden costs

Mr Bear and I both had a carry-on suitcase and a small backpack. We weren’t allowed to bring cabin bags unless we paid an additional fee – we were only allowed a personal item. Unfortunately, we didn’t realise this until we were at the gate so I didn’t include it when I set the budget for this holiday.

The airline staff wouldn’t let us board. The staff at the gate kept telling us to put our backpacks inside our suitcases, but there wasn’t enough room. Then they told us just wear all the clothes so we could walk past the desk with only one bag, and take them off on the plane. Yes – they actually said that! We weren’t able to do that either as we had already worn our big jackets and sweaters to make space in the suitcases.

We ended up having to pay 60 EUR for each bag! I was fuming. Moral of the story – don’t trust airlines and budget for excessive charges!


We were lucky enough to do some high-speed, long-distance train travel while in Europe. Taking the train from Germany to Paris, or Paris to London was an amazing experience. Often, especially if booked in advance, train travel was cheaper than flying. It takes longer, but it’s also much more comfortable.

In this step of creating your travel budget, you’re only considering the costs of getting to your destination. We’ll consider the costs of getting around at your destination in the next step. Some of the costs to consider on a per person basis for train travel are:

  • ticket price;
  • booking fees;
  • baggage costs;
  • fees for choosing your seat;
  • on-board meals and snacks;
  • credit or debit card surcharges.


I love a good road trip. Especially the part where you load up the car with snacks and create playlists of all your favourite songs and podcasts. Travelling by car can sometimes be the cheapest option but that isn’t always the case. It’s important to compare costs as well as how long it takes to arrive at your destination. Some of the costs to consider for a road trip are:

  • cost of fuel (depends on how far you’re travelling and fuel prices at the time);
  • any additional servicing required for your car (if you’re travelling long distances in your car, it might be a good idea to have your vehicle serviced beforehand so that it’s running in top shape);
  • cost of snacks and meals for the trip.

Transportation (getting around)

Once you’ve arrived at your destination, you’ll also encounter costs for getting around. For example, getting from the hotel to a museum in the city. You might be moving around using public transportation or you might just walk around everywhere. One is convenient but the other is free.

I usually like to have some idea of where we’ll be going before I start this step. It’s a good idea to drop pins on Google Maps for all the places you want to visit as well as your accommodation. Then, use the features in Google Maps to determine the best way to get there.

Below are some of the costs I like to consider when setting my transportation budget:

  • cost of getting to and from the airport or train station;
  • ticket prices for public transport for specific locations as well as an allowance per day (in case my legs get tired and I don’t want to walk anymore!);
  • parking and fuel in case you drove to your destination or you’re hiring a car;
  • costs and insurance for hiring a car;
  • transport or city passes.
Transport passes

It’s worth looking into tourist passes at your destination. They often include entrance into certain attractions, as well as transport passes for a specified number of days. You can research these passes and general costs for public transport on Lonely Planet.

For cities like London, we relied on the Underground to get around. London is just too big to comfortably walk across without feeling like your legs are going to fall off. For Rome, however, we walked everywhere. There’s something to see around every corner and without even realising it, we walked over 30,000 steps in one day just exploring the city.

Food & Drink

Just like with your everyday budget, costs for food can get drastically out of control when you’re travelling. When I’m travelling, I’m on a see-food diet. I see food, and I eat it! As a result, my food costs can add up to a small fortune. I try to make my food & drink budget as comprehensive and robust as I can to avoid surprises when travelling.


I set my food & drink budget for my holiday by following a few simple steps. Firstly, I take into account any specific restaurants we know we want to eat at. If there’s an online menu available I’ll set a budget based on the average prices of the types of dishes we like to eat. If not, I check reviews to see if anyone has mentioned the prices.

Next, I set an allowance for food & drink per meal, per person and per day. This is dependent on each destination and the types of places we’ll be eating at – both of which can greatly impact the price. Lonely Planet is a great place to get estimates for these costs

This part of my food & drink budget usually looks something like this:

Food & Drink AllowanceCost per Person, per Day

Therefore, if Mr Bear and I were taking a 5-day trip, our food & drink budget would be $100 per person, per day. That comes to $1,000.


However, if your accommodation gives you access to a kitchen and cooking facilities you might be doing more cooking than eating out. This would apply for lodgings such as a serviced apartment or Air BnB. In this case, you would need to set a grocery budget the same way you normally do. Just remember to base your budget on grocery costs at your destination, not what you pay at home.

Activities & Attractions

And now, we get to the fun part! Design your dream vacation and all the things you want to see and do on your travels. Firstly, have your detailed itinerary of what you’ll be doing each day close at hand. Secondly, open Google and get searching!

Below are some of the costs to consider per person, per activity for this area of your budget:

  • ticket price including any booking or reservation fees;
  • other costs in addition to entrance fees (for example, costs for guided tours or audioguides);
  • cost of city passes which include entrance to multiple attractions;
  • food, drinks and snacks during the activity.

The cost of getting to and from each activity should already be included in your transportation budget. Similarly, the cost of souvenirs is considered in the next step.

In addition to your planned activities and attractions, I’d also recommend adding an allowance for spontaneous events when you set the budget for your holiday. During our last trip to Barcelona, we spontaneously decided to try one of those hop-on, hop-off sightseeing bus tours.

It was the first time either of us had been on one of these tours but we both really enjoyed it. As a result, I adjusted our budget for Paris (the next city we were visiting) to include a sightseeing bus tour as well.

Incidentals, Tips & Spending


This section should include the budget for any other incidental costs for your holiday. There is no specific list here, as it depends on each individual vacation. However, I like to include costs such as travel insurance, additional luggage, hats and new walking shoes. That is to say, costs that you incur because of your trip that don’t fall within the other categories should be included here.

If you’re anxious like me, you might also want to include a buffer in your budget in case something goes terribly wrong while on holiday. For example, if you lose your luggage and need to buy some necessities or if you need to buy an umbrella. Any buffer should also be included in this section.


You’ll definitely need a tipping budget if tipping is mandatory at your destination. However, even if it isn’t, if you like to tip, you need a tipping budget. Firstly, make a list of any instances where you’ll need to tip. For example, the service staff at restaurants. Next, research the tipping rates at your destination. This will show you the minimum you are required to tip, however, you can always allow for more if you want to.

Then, multiply your budget in those areas by the percentage you will be tipping. For example, let’s say you’re travelling somewhere where you need to tip restaurant staff. Your food & drink budget for your vacation is $1,000 and the tipping rate is 15%. Therefore, your budget for tipping would be $150 ($1,000 x 15%).

However, for hotel staff, you may need to tip them a certain amount as opposed to a percentage. You can research tipping practices at your destination through Lonely Planet.


I love shopping when I’m travelling. Closing my suitcase afterwards, however, is another story. For each destination I enjoy, I like to buy some stationery, jewellery or scarves as souvenirs. The amount that I allow for spending is usually the difference between all other budgeted costs and how much I have to spend on each vacation.

Similarly, you might want to purchase souvenirs at certain activities and attractions you visit. For example, when we went to Paris, we had planned to go to Disneyland. As a result, I increased my spending budget for things I wanted to buy while we were there. Include an allowance for holiday spending money in your budget – the amount you set is based on you, your life and your circumstances.

Your travel budget in your overall financial plan

You made it! Let’s be honest – it’s a lot of work getting to this point but planning a trip is so much fun, don’t you think? At this point, you should have determined costs for all the categories for your travel budget. After that, it’s time to incorporate your travel budget into your overall financial plan and, most importantly, make your holiday debt-free. Because the best travel is debt-free travel.

Total amount I need to save in my debt-free travel fund

The next step is to add up all your travel budget categories. For example, let’s imagine you’re planning a trip for 2 to London for 5 days:

Budget CategoryBudgeted Amount
Flights (getting there)$3,000
Transportation (getting around)$250
Food & Drinks$2,000
Activities & Attractions$700
Incidentals, Tips & Spending$1,500

You’ll need to save up $8,950 for your vacation. (Note that these are just random numbers!).

How long I have to save up

Firstly, determine how many paycheques you’ll receive between now and when you’ll need to dip into your travel fund. However, keep in mind that this may be before you actually leave for your trip.

Some costs, mainly your flights and (sometimes) your accommodation will need to be paid in advance when they’re booked. Similarly, tickets for any activities and attractions may also need to be paid for before you actually leave for your vacation.

For instance, let’s say you’re taking your trip in one year from now (12 months), but you’ll start incurring costs 2 months before you fly out to London. Therefore, you have 10 months to save up for your trip. If you’re paid monthly, that means you have 10 paycheques to save up for your London adventure.

Now, costs like food & drink, tips and spending won’t actually occur until you’re physically in London. But for simplicity, let’s assume you want your entire travel fund to be completed 2 months before your vacation.

The amount I need to save from each paycheque

Finally, take the total amount you need to save and divide it by the number of paycheques you have to save up for it. In this scenario, you have 10 paycheques to save $8,950, so you’ll need to save $895 from each paycheque for your next 10 paycheques.

Total trip amount$8,950
Number of paycheques10
Amount to save from each paycheque$895

However, now comes the hard part. Can you afford to dedicate this amount to your travel fund from each of your paycheques? If you can’t, then you only have a few options:

  • delay your trip – the more paycheques you earn between now and your trip, the more chances you have to save up;
  • reassess your budget – for example, you might need to shorten your holiday, cut things out, take cheaper flights, stay at cheaper accommodation;
  • think of ways you can earn more income, allowing you to save more money towards your trip – for example, sell unused items around your home, take on extra shifts, start a weekend job.

You might not want to do any of those things, but they are necessary choices you need to become comfortable with if you want to live a debt-free life. The best way to avoid putting yourself in this situation is to start planning your trip as soon as you possibly can. This will maximise the number of paycheques you have to save up.

Travelling gives you once-in-a-lifetime experiences and memories. Creating a travel budget means you’re creating a plan to live those dreams debt-free without sacrificing your financial freedom. It allows you to dedicate a portion of your paycheque to debt-free travel while still working on other financial goals.

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