In the last article, Jessica Spaulding outlined her method of keeping track of her spending. She records every purchase and a calculator on her laptop works out how much she has left to spend for the month. She swears by it; but it couldn’t be more different to the method Craig and I employ to manage our spending.

We spoke about our budget in a recent episode of the Indie Travel Podcast. In this article, I want to put it into written form as a comparison to Jessica’s system. Let us know which you prefer, or if you have an infinitely superior method of budgeting for travel.

Cash budgeting to save

Most people need to cancel debts and save before they start travelling. Many people just cut back on everything and put as much as they can in the bank, but you don’t need to cut out all the comforts in order to save if you use the cash budgeting system.

A good place to start is to compare your incomings and your outgoings. First, write down all the money you have coming in per month – for most people this will just be wages or salary, but you might have other sources of income.

Next, write down all the money that’s going out per month. Keep all your receipts for a month for an exact amount, or just estimate if you’re in a hurry. This can be quite a big job, so it helps to break it down into categories. We used the categories accommodation, transport, medical, groceries, and miscellaneous. Convert weekly or yearly costs to a monthly figure by multiplying weekly costs by 4.3 and dividing yearly costs by 12. This can be a good way to work out medical charges and car bills especially.

You can’t save much on accommodation, transport or medical costs unless you want to make some rather major lifestyle changes (though downsizing to a smaller house might be a great way to save a lot of money). But you can control the smaller expenses – groceries and miscellaneous expenses.

Work out how much you want to spend each week on groceries and miscellaneous expenses, and visit the bank once a week to withdraw that amount in cash. Keep the money in your wallet, and don’t spend any more! For example, you might choose to spend $50 a week on groceries, and the same on miscellaneous expenses such as haircuts, mobile phone topups, coffee in a cafe or going to the movies. So on Monday you’d go to the ATM and take out $100, which would be all your spending money for the week.

Why?

The major benefit of the cash budgeting system is that you’re aware of how much you’re spending. Using a credit or debit card for all purchases distances you from your money, but being forced to only spend what is in your wallet makes you consider each purchase a little more closely. I know that if I’m in the supermarket with my debit card and I don’t want to spend more than $5, and my total comes to $5.50, I’ll just put it on the card and forget about it. But if I only have $5, I’ll have to choose something to put back.

Bank accounts

It’s worth getting a dedicated savings account to put your savings in, just to keep them separate from your current account. Some accounts give you extra interest if you don’t withdraw any money over a month, or if you only make one withdrawal.

Cash budget for travel

When you’ve finished saving and set off on the road, you can keep using the cash budgeting system. Forget about recording your incomings and outgoings, just look at how much you have to spend and set a reasonable daily budget. Once a week or fortnight, visit an ATM and take out enough money to cover your budget for the next week or fortnight. Every day, move your daily budget amount into your wallet, and keep the rest out of sight, preferably in a money belt.

You’re much less likely to overspend if you limit yourself to only spending the money in your wallet. You’ll be more in touch with your finances because you’ll notice immediately if you’re running out of money in the middle of the day every day, and you’ll consider each purchase a little more closely when you think about how much of your daily budget it is worth. You’re going to need some cash anyway, since a lot of shops and hotels won’t accept credit or debit cards. Not to mention the huge fees the banks like to charge you for using your plastic overseas.

We’ve been using this system for six years both at home and away and have found that it really works for us. We’re the kind of people who lose receipts and never get around to doing the data entry Jessica’s system requires, so this is a low-tech way of making sure that we don’t overspend.

How do you keep track of your spending when you’re on the road? Or don’t you? Leave a comment in the comments section.