Many of our retired clients are excited to spend some of their newfound free time traveling around the country or around the world. It is rare though that a client can (or should) plan trips without regard to the cost, so we offer below some thoughts on how to afford those bucket list trips while staying on solid financial footing.
Determine the (Approximate) Bottom Line. As financial planners, of course, our recommended starting point is to consider approximately how much money you have available to spend on a trip. The level of your expenses for a given excursion depends on countless tradeoffs (as discussed below), so it is helpful to consider at the onset how much you can afford for a given trip or for travel in general over the course of the year(s). For PFS clients, your financial plan likely includes an annual travel budget as well as savings targets (for those who are working) or withdrawal targets (for those who are retired), which can serve as helpful guidelines in this respect.
Consider the Destination. Travel expenses within North America, Western Europe, and Australia/New Zealand are generally more expensive than those within Central and South America, Eastern Europe, Africa, and Asia. The airfare to the latter regions might be more pricey, but once you arrive, the cost of accommodation and meals will be less on average, meaning that especially for a longer trip, those destinations will provide greater value. Within each region, certain countries or cities are also more costly than others. In Western Europe, for example, Iceland and Switzerland generally rank as most expensive, so if you are open to a variety of travel destinations and want to stick to a budget, you might pick one with lower daily costs. [Note that the strength of the dollar relative to another country’s currency can change the affordability of that destination over time as well. Checking out a chart of historical exchange rates can help inform whether the currency exchange might help or hurt your travel budget.]
Work the Points Game. As we have discussed in previous posts, one way to reduce travel costs is to take advantage of credit card rewards, possibly opening a new card to claim the new account bonus, which can often be worth hundreds of dollars. (Just be careful that you do not open new credit cards so often that it materially hurts your credit score.) Accumulating rewards and figuring out the most advantageous ways to use them (e.g. possibly by transferring miles to airline and hotel travel partners) can significantly reduce travel expenses regardless of the destination.
Determine Your Spending Priorities. The main categories of travel expenses are typically: airfare/transportation, accommodation, meals, and activities. The cost for each category can vary substantially depending on your preferences and priorities. For transportation, driving to a national park might cost around $100 while flying first class to a foreign destination might cost over $10,000 round trip. A bed in a hostel might cost $50 a night while a suite in a luxury hotel might cost over $1,000 a night. Obviously, the same goes for meals and sightseeing activities. For some travelers, buying groceries at a local store for meals or snacks might cut down on expenses without dampening their experience, while for others savoring another country’s cuisine in fine restaurants may be the main reason for traveling there. Some tourists may not even conceive of visiting London without the quintessential, though pricey, experience of viewing the city from the London Eye (up to $73 for a walk-up, fast track ticket), while others might find free entry at the British Museum compelling enough to check out the Rosetta Stone instead. Taking time in advance to consider what is most important to you may help in managing your travel budget. Pursuing the inexpensive route for some categories may enable you to splurge on others that will make the trip particularly memorable for you and still stay within your budget.
Consider Economies of Scale. In terms of accommodations—and in some cases, activities—you may benefit from traveling with one or more friends. Cruises, for example, can be particularly pricey if you are paying for a single cabin as compared to sharing one. The same could be true for other lodging such as hotel rooms or house/apartment rentals (e.g. VRBO rentals). Do you have family or friends who might be interested in joining you on the same excursion? Splitting the accommodation cost one or more ways could significantly cut down on costs. Depending on the size of your group, this could also reduce expenses with group tickets for sightseeing destinations or private tour guides.
Avoid the Crowds. Remember the concept of supply and demand from Econ 101? Any time you can take advantage of “low demand,” you will likely encounter lower prices and help your travel budget. For example, imagine your bucket list item is a trip to Paris. Would you consider traveling there in February instead of June? Do you have the flexibility to book your airfare from Monday to Monday, instead of flying on weekend days? Would you consider a local restaurant in a quieter part of the city instead of eating in Montmartre or near the Eiffel Tower?
What is the least expensive option for travel in retirement? Don’t do it. Traveling costs money! (Ha.)
But as financial planners, our job is not to ensure that you accumulate and maintain the biggest possible retirement nest egg. Our job is to help you meet your financial goals. And travel is often one of our clients’ favorite financial goals, one that brings joy and excitement to their retirement phase, when they finally have the time to enjoy the fruits of many years of labor. By considering what aspects of travel are most important to you and how to prioritize them within your travel budget, you can hopefully have a very satisfying trip while remaining on a steady financial path.
