How I got my budget right when I went on my dream vacation

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How I got my budget right when I went on my dream vacation

Is $2,000 a lot to spend for a weeklong vacation in Europe? What about $7,000 for a six-month backpacking trip? Or the same amount for a luxury holiday in Hawaii?

In my experience, there's no "good" or "bad" price for a vacation because every person, budget and exciting trip is different. I recently traveled to Ethiopia and Kenya for just under a month, visiting ancient churches, experiencing a foreign culture, sweltering in one of the hottest places on earth and going on safari. How much is reasonable to spend on a once-in-a-lifetime trip like that? It's hard to determine simply by thinking about how much it's worth to you.

When I start determining how much I'm prepared to spend on an upcoming vacation, I begin with two key variables: the minimum it'd cost to do this trip the right way and how much I have at my disposal right now.

How I estimated my travel budget.

The first step, for me, is to do a back-of-the-envelope calculation of roughly how much the trip I'm envisioning will cost.


I planned to cash in frequent flier miles for my flight from the U.S. to Ethiopia, meaning I'd only have to shell out around $100 in fees and taxes for that leg of the trip. Rather than braving public buses in Ethiopia, I decided to take four domestic flights, which could have cost around $550, according to some research I did.

However, Ethiopian Airlines discounts domestic flights by as much as 50 percent if you also book an international flight with them -- which I did from Ethiopia to Kenya, a flight that cost $200 -- so I only ended up paying $275 for my flights around Ethiopia.

Total estimated cost: $575


I figured hotels in Ethiopia and Kenya would be cheaper than in more developed countries, but there isn't the same kind of backpacking scene that you'd get in Europe, where it's possible to stay in budget accommodations or even share a hostel dorm room. In Africa, I'd need to stay in hotels, except for the three days when I'd crash at my friend's apartment in Nairobi. My trip was a total of 24 days, so I'd need to pay for accommodations for 21 nights at an estimated cost of about $40 per night.

Total estimated cost: $840


This is hard to estimate when you've never been somewhere and don't know how much things cost, but it felt safe to say I could figure out breakfast for under $5, lunch for under $7 and dinner for under $10 (so about $22 per day for 24 days).

Total estimated cost: $525


Some of the places on my itinerary could only be accessed through a guided group; my trip to the Danakil Depression required a four-wheel drive vehicle, drivers, cooks, sleeping accommodations, a guide and even armed guards, making it impossible to do it myself. It also didn't seem worth bringing all the gear I'd need for a hiking/camping excursion in the Simien Mountains. Then there was the three-day, two-night safari, which also isn't exactly a show-up-on-foot-and-try-to-see-lions situation. So, at the outset, I knew I'd do at least three organized trips.

Before departing, my friend and I emailed some tour guides. We were quoted $600 a person for four days in the Danakil Depression, $150 for the Simien Mountains and $320 for my safari, not counting $160 in national park fees simply to get into the Masaai Mara preserve.

Total estimated cost: $1,230


I decided to budget for a new backpack for this trip. Before I bought it, I estimated the cost around $150. Plus, I'd need decent trail shoes for hiking up a volcano and around the Simien Mountains. Let's call that another $100. Additionally, I decided to splurge on a $100 water sterilizer so I'd be able to drink tap water whenever I wanted.

Total estimated cost: $350


I'm not a huge souvenir-buyer, but I had about eight people to buy gifts for, and I planned to spend roughly $20 per person.

Total estimated cost: $160


What about entrance fees to attractions? Taxis? Random other expenditures? Unforeseen costs? And what if I underestimated some other category? I decided to buffer my estimations by an additional $10 a day.

Total estimated cost: $240

Comparing the estimates to my bank account.

If all those estimations were accurate, I'd need $3,920 for this vacation. Better to overestimate than underestimate, so let's call that $4,000. Once that number is squared away, the next question has to be: Can I actually afford this trip?

Years ago, when I got my first raise at my old job, I vowed not to change my lifestyle in a meaningful way -- instead, I'd save the difference between my old salary and my new one. Because of this, I was able to afford this trip without any danger to my emergency fund or other long-term savings.

If the answer was no, I'd have two options: I could put the vacation on hold and save for a while longer in order to hit my target. Or, if I really wanted to travel sooner than that, I could come up with a number I could comfortably afford and then find some other vacation to fit that amount.

Keeping track of it all.

While on my trip, it was important to keep an eye on how I was trending so I'd know if I was spending way more than my target.

I traveled with a friend for most of the trip, so we kept track of our shared costs through an app called Splitwise. When it came to money I spent alone, I wrote it down on paper.

Importantly, I did not stress myself out by worrying too hard about how much I spent in which category. I prefer to calculate running daily averages for my spending, which provide a top-level view of how I'm trending for my overall vacation.

Did I succeed?

Thanks to the power of overestimation, I actually came in under budget -- I spent between $3,300 and $3,400. Turns out, I way overestimated the cost of food in Ethiopia. Breakfast was usually included at my hotel, and lunch was often only a couple of dollars.

Hotels were also cheaper than expected. I spent more for a single on the nights I traveled alone, but I generally spent less than $30 a night when I was splitting a double with my friend. Additionally, we were able to negotiate down the price of our excursion to the Danakil Depression by an extra $100 per person.

On the other end of the spectrum, I vastly underestimated the cost of taxis. I spent almost $200 on getting around by taxi within cities. I also underestimated how necessary it'd be to hire guides.

For me, budget overestimation is the key. After all, if I underestimate how much I'll need, there's the risk of being stranded and forced to dip into emergency savings. Yet, what's the harm in saving up $4,000 and only spending $3,400? $600 in my pocket to save for next time.

About the author: Allison Kade is a freelance writer whose work has appeared in publications including Bloomberg, Travel + Leisure, Forbes, Real Simple, Business Insider, TheStreet, BoingBoing, Fox Business News and more. When she isn't writing about personal finance, she's probably still writing fiction. Or traveling. Or solving -- or creating -- puzzles. Follow her on Twitter.

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