Backpacker Budgeting
Finances
To be perfectly honest, I was never very good at managing my money, and by my count, there were four fairly sever instances where I was simply out of cash. I made it through, and for me it added to the adventure. However, this level of uncertainty may not be for everyone, so I have included a section about how to budget and save money. It is something I learned as I went, and hopefully it can help you along the way as well.
Managing money is possibly one of the most difficult aspects of travel, and unless you are consciously aware of your financial situation, you can be in for an unwelcomed surprise. Prior to travelling, most backpackers will have a set budget in mind, a goal as to how they will manage their finances. They know how much they can afford to spend each day, and how much they will need to have on hand in case of emergency. There are only a handful of people who are able to stick to this type of budget. People with exceptional dedication, will power, and financial understanding. However, most travelers are simply not good budgeters. They arrive feeling confident with the budget they have laid out, only to find themselves way over budget after only a few months, weeks, or even days. This is perfectly normal, it is nearly impossible to anticipate the additional expenses that will likely always occur during the course of your journey.
There are a number of things that you should consider when travelling on a budget. With limited finances, it becomes important that you are always aware of your current financial situation, and the amount of money required to cover the rest of your journey. The following section presents a number of important things to consider. It should be noted that while they are a good guide, inevitably it will be impossible to abide by all throughout the entirety of your travels. You may not even want to; running out of money can certainly be a character building exercise, as well as teach you the importance of industrious thinking. However, it is important that your finances or lack there of, don’t become a hindrance on your travels. Therefore, it is important to consider the following advice, even though I didn’t follow any of it myself.
Budgeting
In it’s simplest form budgeting is a useful tool for calculating how much money you have for everyday living after subtracting fixed costs such as accommodation, travel expenses, insurance, emergency funds etc. The number you come up with will be the amount you have left over for the variable expenses such as drinking, eating, touring, partying etc.
If you do your calculations correctly, you will be able to accurately predict how much you can afford to spend. This begs to question, why then if the calculations are so simple, do people seem to run out of money while travelling? The answer is easy, it is impossible to accurately budget for your trip, unless of course you are willing to sacrifice a lot in the process and miss numerous exciting opportunities. There are always additional costs that you must consider. You may find yourself out for a few beers, and before you know it, you are 4 pints past your budget for the day. Alternatively, you may be on a tour and find an activity that you really want to do that costs a little bit extra. This is normal, and you shouldn’t be overly concerned. When you wake up the next morning you can either readjust your spending per day down to account for the extra money you spent. Alternatively, you can choose to readjust the number of days until you have to find work to make up for the overused portion of the budget. Either way, you are continually accounting for the extra dollars, and you will be acutely aware of how much you have left in terms of time and money.
The point of a budget, in my opinion, is not to restrict your activities; rather it is to keep your mind attentive on what your current finances look like. The absolute worst thing you can do is ignore your bank statement in the hopes that it will somehow sort itself out. Believe me it won’t, and the only way to stay above water is to take charge of your financial management.
Try to create a budget that is as conservative as possible. If you think you will need $20/day, up it to $30/day just to be on the safe side. Don’t fret if you go way over budget, just be aware of what you will need to do in order to correct the situation e.g., get a job sooner, or do activities on the cheap for a while. Most of all enjoy your time and take part in any activities that interest you. A budget is a guide, not a restriction, and there is always work if you are willing to look.
Financial Buffer
Anticipating that everything will go according to plan is a grave mistake. It would be difficult to find a backpacker who didn’t have some financial misfortune during the course of their travels. It is important to be prepared for these situations, and you should always have a reserve store of cash in case of emergency. Even if you are sure that you can get funds from home if needed, this can take time to process, and you may need the funds immediately. I was not as diligent with this practice, and there were times when I honestly did not have enough money for basic necessities such as food. However, I was lucky, and always seemed to come across someone or something that could help me out of my situation. The best thing you can do is make sure there is enough in the bank to make it through at least a week including food and accommodation, this way you won’t find yourself desperate and hungry.
Contracts
It is virtually impossible to get through a week let alone a day without filling out some type of contract. Even signing into a new hostel will often require a sort of contractual agreement. It is important that you know what the contract says, and what extra charges there may be, if any. Not carefully reading the contract is probably the #1 way that backpackers lose small portions of money throughout their journey, which can add up to a lot in the end. I went on a number of tours that required additional fees be paid prior to engaging in the activity. For example, on my tour from Melbourne to Adelaide the contract stated (on the back of the card, somewhat out of sight) in addition to the $150 for the 3 days trek, there was a further $80 fee for food and water. You can’t really go on a 3-day trek without, so begrudgingly each backpacker on our bus forked out an additional $80 each. It would have been cheaper to rent a car and buy our own food at that price.
By looking into what the contract entails, you can find these hidden costs and determine if the trip or activity is worth the price tag or not. More often, I found that by splitting a car rental with a few other travelers, and sharing the cost of food, we saved upward of 50% on our tours. The experience was just as enjoyable, and we had the added benefit of doing it at our own pace. Even staying longer or leaving early depending on the weather and things like that.
Even when you read a contract, and think you understand what it means, you may be making false assumptions. There is often a stark difference between what the contract writer implies and what the signer infers. For example, at one hostel I signed a contract that stated there was no loud noise permitted at night. The problem was that the term ‘loud’ is ambiguous, allowing for a wide variety of interpretations. What this statement actually implied was that we could not make any noise at all. What I inferred was that a low level of talking would be acceptable. Not so, and within weeks my fellow roommates and I found ourselves being continually scolded and threatened with eviction.
Understanding what your contract means, and asking for clarity on ambiguous terms can be the difference between getting full value for what you paid or losing your money due to some ambiguous technicality. Know what you are getting into before committing, and always ask for clarification about additional fees and mandatory stopovers that may require extra spending on your part. If you don’t like the contract, or have concerns, move onto another company, there are plenty.
Read the Fine print
As travelers we tend to take our situations for granted and forget that a certain level of due diligence is always required no matter what the circumstance. It sounds simple enough, but often we don’t take the time to read the fine print, only to find ourselves being screwed in the end. For example, when I first landed in Australia, I sought out the local convenience store in order to purchase a calling card. Inside the store were more than 20 different options, ranging from 1.9 cents to 5.9 cents per minute. It seemed only sensible to purchase the card that offered the lowest rate. What I didn’t realize was that the cheapest per minute card charged a one-dollar connection fee for every time I tried to make a call to Canada. If the person wasn’t home, I was still charged the connection fee. The next time I went back, I found a card that was 2.9 cents per minute, but with no connection fee. It ended up lasting me 3 times longer than the previous one.
Car rental companies are notorious for endless amounts of fine print and you want to be sure that you understand each point before committing to the rental. There are often large deductibles that you have to pay if you crash the car, it is important to know what amount that is, and if there is a way to reduce it.
There are other circumstances where you may not even realize that you have signed an agreement that forces you to share the liability with others. On Fraser Island in Australia for example, when you sign up for the 4X4 tour you will be placed into a truck that can carry up to 10 passengers. The initial agreement requires that you share financial burden of any damage done, regardless of who is driving. We met an unfortunate group of travelers who had just run off the edge of a sand dune. They told us that they had been yelling at the driver to find a safer route across the beach, but he ignored them. The cost was $1000 for replacement parts, and each of them was billed $100 extra at the end of their trip.
Always read the fine print and know exactly what it means. This can be the difference between saving or losing an extra week of accommodation money.
Negotiations
As a traveler, it can be difficult to find the appropriate level of confidence when negotiating. Travelers are often made to feel as though the person who is renting or selling to them is doing them a favor. Additionally, the rules in each country for how much negotiation room there is when buying a car, renting a room, buying a tour etc can be vastly different. The important thing to remember is that no matter what the country, or rules, you need to be comfortable with the terms in the agreement. If you are not, then you need to either renegotiate, or walk away.
Not all countries will negotiate or barter for items, but it never hurts to try. Understand what something is worth before making the purchase, then try your hand at negotiating the price. This way you can confidently walk away if the price is no good, and purchase when the price is right.
