How to budget for a big trip

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For some people budgeting is a way to get excited about a trip. They use it as the first step in the planning and a way to get themselves psyched up about a destination. Some people are, of course, certifiably insane.

For most of us, though, budgeting for a trip is like going to the dentist after bingeing on sugar for a few months. But budgeting is better than running out of money halfway through a trip and having to make an embarrassed call home to friends or parents. It only takes a few simple steps to save you a whole trip of stressing about cash flow.

Figure out how much you'll need

Start your budget with the biggest expenses first – usually this will be your flights, but accommodation also adds up. In Lonely Planet's The Big Trip we included sample prices as a rough idea of how much it costs for a room, a street snack or a restaurant meal. In the destination pages of lonelyplanet.com - eg lonelyplanet.com/china - there is often specific information on a country's costs under the 'practical information' section.

With a rough idea of how long you'll be away, you can work out a daily cost based on room rates and meal costs. Add in a little more for activities, museum entry fees, a couple of souvenir t-shirts and the odd concert.

Allow for an occasional splurge. Add a little fat for a Singapore Sling at the Long Bar or skydiving at Lake Taupo. The worst budget is a chain at your leg pulling you away from the best (if slightly more expensive) travel experiences. Sure it can be cheaper to self-cater your way around Europe, but if you're not trying paella in Barcelona or wagyu in Tokyo then you won't enjoy the trip.

What to spend before you leave

Add in pre-trip costs including visas, reliable travel insurance and immunisations. Some travellers skimp on travel insurance, but if you can't afford travel insurance, you can't afford to travel. Even if nothing goes wrong, it pays for itself in peace of mind and when something does go wrong (lost luggage or cancelled flights) you'll find it invaluable.

I don't like to over-invest in specialised travel gear, but quality luggage and comfy walking shoes always make for an easier trip. Power adapters, a trusty Swiss Army knife and a torch might also be worth buying, but travelling light is always a good aim.

How to save as much as you need

Once you've worked out how much you need, then you've got a figure you can save towards. Some people make this number their screensaver or put it on their fridge using this saving goal as motivation to go to work everyday.

Have your very own telethon-style countdown as you save towards the goal. If you find saving tough, try budgeting software like Pear Budget or Mint – the latter includes countdown functions for your savings and can suggest ways to cut your expenses. If you don't hit your saving goal, then it might be time to go back and re-visit the budget - maybe that Singapore Sling might have to be in a more down-market bar.

The most important rule for your travel budget is flexibility. Allowing for on-the-road splurges (and the odd belt tightening) will take the stress out of your trip, but will also mean that when you get home you won't be met with a huge credit card bill. A little planning at the start of the trip will save penny pinching, grouchy haggling and worrying about being ripped off at the cost of enjoying your trip.

How to keep your cash when you're on the road

Before you go, someone is bound to force one of those ugly, flesh-toned money pouches on you because it 'saved their life' back when they did their gap year. Not that there's anything wrong with money belts or pouches, but you could probably do just as well by having your valuables in an inside pocket of a zipped-up jacket.

Carrying your money in a few forms and in a few different places is always good idea. Diversify your money so you hold a little cash, a credit card and an ATM card. Although there are good ATM locators for Visa, Mastercard and other major credit card providers, you'll find that they can break down, run out of cash or otherwise fail just when you need to pay that slightly creepy taxi driver. Sometimes cash is still king. I like to carry a 'whip out' – a small mount of loose cash to pay for things as you're walking along. That way your wallet is conveniently stashed and pesky pickpockets don't know where to hit you.

George Dunford is the author of Lonely Planet's The Big Trip. He blogs at www.georgedunford.com

This article was first published in January 2011 and was republished in January 2013.