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Saving smart for that trip of a lifetime

At TIAA, we spend a lot of time talking about how to save for those long-term goals, like retirement, but we understand that there are also plenty of other goals to save for along the way—and traveling is right up there at the top of the list.

Molly knows to be a backpacker, you have to be a budgeter.

Whether it’s our friends or our favorite brands, these days, it seems someone is always filling our social feeds with images of beautiful strangers traveling through even more beautiful and stranger lands. Backpackers hiking Machu Pichu. Camping under the northern lights. Strolling around the blue city of Morocco. Finding zen in the Buddhist temples of Kyoto.

They’re great fantasies, right? But, more often than not, those epic trips are paired with excuses and doubts. According to Psychology Today, one of the top three roadblocks for pursuing travel is cost. Roaming around far-off countries seems expensive and irresponsible if you have debt or bills to pay. #Wanderlust #NeverHappen #SadFace

But what if we told you that a little smart planning could make that fantasy adventure a reality? We met one 29-year-old who did just that. Molly, like many of our not-for-profit clients, had the ability to take an extended vacation away from work and backpack through Southeast Asia on the cheap. Here’s how she did it.

Select an affordable destination

For many, exploring the world is as valuable an investment as saving for retirement—and one that pays dividends toward your personal growth. But simply throwing darts at a map is a great way to ensure your trip never gets off the ground. Before you take flight, it’s important to do some deeper research into a destination’s cost of living.

Start by choosing a region of the world that’s known for being low-cost and has a strong exchange rate from your local currency.

You can search “how much does it cost to live in South America?” and, after a little math, get a rough estimate for how many of your dollars, pounds or Euros it takes to live comfortably in that area. Make sure you do this for all the countries and individual cities you’d like to visit.

As you evaluate your destinations, be sure you look into the average cost of travel necessities, like where to sleep (hostels or homestays?), what to eat (street markets or restaurants?), and how to get around (trains or buses?). These are the most critical things to understand before you determine your budget.

Create a realistic budget

Now that you understand how much things cost, the next step is to figure out how you’ll save enough so that you can comfortably experience your vacation without financial stress. Time to break out the spreadsheet!

To arrive at your basic travel budget, you can multiply the average cost of living in the places you’ll visit by how long you hope to stay there. For Molly, $800 x 3 months = $2,400. Then, it’ll help to break this monthly total down into a daily amount: $800m/30days = $25 per day. Why? Because, while you’re traveling it’s much easier to track against a daily budget than a monthly one.

Next, take a close look at all of your current mandatory expenses and bills that you’ll have to keep paying while you travel, such as student loans, doctor bills, car payments, and rent. You don’t want to come home to debt collectors! Tally up the total cost of these expenses based on how long you’ll be away: $500 x 3 months = $1,500.

“For Molly, $800 x 3 months = $2,400. Then it’ll help to break this monthly total down into a daily amount: $800m/30days = $25 per day.”

Add your current mandatory expenses to your basic travel budget to arrive at the minimum amount you’ll need to save for vacation. But minimum amounts don’t equal dream adventures, unfortunately. So, go ahead and add in additional costs for any trip add-ons, like excursions, certifications, shopping, or gifts.

Lastly, it’s always good to give yourself a buffer. For international travel, having a 3-5 percent buffer allows for flexibility in your spending and a safety net for unforeseen circumstances.

Cut back and save

That budget in your hands may seem daunting, but it provides a real, tangible goal to save toward. For many of our TIAA customers in not-for-profit or education roles, you may have the opportunity to get away for a few months while still receiving a paycheck. So, based on your goal, your income and how far away you are from take-off, you can determine how much you’ll need to save every week or month.

To reach that goal, you’ll need to make some changes in your current lifestyle. Some may be short-term, but others may inspire you to make some permanent behavior changes that’ll have life-long financial benefits. And another thing, don’t pause your retirement savings. That money will help you fund vacations 20 years from now!

Start by looking at where you spend frivolously. Are you a regular at happy hour every week? Buying coffee every morning? Always buying tickets to concerts or sporting events? You can cut out the unnecessary spending right away.

Next, look at things that you’d be willing to part with for a short period of time, such as gym memberships, expensive grocery items, and premium music or TV subscriptions.

Be hard on yourself and ask, “Is this something I truly need to survive or just something I want?”

Saving doesn’t sound like so much fun, right? We get it. But, remember, the goal is your dream adventure! The best way to stay motivated is to keep that vision front and center. Put a gorgeous picture of your destination right next to your budget amount—somewhere you’ll see it every day.

Trust us, with the right preparation and a lot of willpower, you can have the financial freedom to check that amazing adventure off your bucket list. It worked for Molly and it can work for you, too! And remember, if you need any advice or tools to help you save for your other big goals besides traveling, you’ll find everything you need at TIAA.org.