The problem of trying to figure out how much cash to bring on a holiday is something that typically doesn’t have a good solution. Overdo it and there’s so much excess cash that sometimes tempts you to spend it on things you don’t need just so you don’t have to convert them back to your own currency. Under do it and you’ll be searching out another money exchange counter in no time, which frankly, wastes precious time.
When I used to do bi-annual 2-week trips to Europe about a decade ago, I went on a strict budget and told myself that no matter what, this fixed amount – do or die – was going to have to see me through. It clearly didn’t always work, particularly when I sneaked in a purchase or 2 with a credit/debit card in some seedy places.
Most people go about budgeting like this:
- ask someone who went to the same place you are going how much they thought they spent
- (in cases where nobody is around to ask), start asking on online forums
- wait till the last minute, panic, come up with a random figure to bring and just wing it
None of these methods are very helpful (the last one even more so). And you find yourself either trying to do stupid things to save costs near the end of your holiday (“Who needs to spend on laundry? I will wear the same pair of underwear for 3 days – I know I can do it!”), using a credit card in some seedy venue, then fretting about your card getting cloned or trying to change money at a money changer when you can’t speak the language and don’t recognise the currency properly and so are almost guaranteed to get cheated to some degree.
I figured that there had to be a practical way to get an estimate of how much money to bring on a holiday. After nights of desperate browsing and calculating, it seems I somehow hit upon a sort of method of doing just that.
The general idea behind this is to:
- note down any costs which are fixed
- try to estimate those costs which are variable (in foreign currency)
- total the whole lot up
- figure out how much you need in your home currency to change for that amount of foreign currency
What you are trying to do is to make sense of madness, so some boundaries must exist. Please note that this will only work when some basic conditions of your trip are met before you go on it :
- you know where you are going (the exact location)
- you know the length of the trip
- your accommodation is booked ahead of time
- activities/side trips are mostly booked ahead of time
- you spend responsibly while on a holiday
If you are backpacking to a general region, aren’t sure exactly which countries/regions you will be in or how long your trip will last then this won’t work for you. Or if you are the sort who likes buying a round for the entire bar in every bar, this isn’t for you, either.
But if you meet the conditions above, here then, are a rough series of steps to figuring out how much to bring. First, though, figure out the fixed expenses, such as air tickets, pre-booked activities and tours, hotel accommodation charges, transportation and prepaid SIMs.
1. The length of your trip
This is the first thing you figure out since this determines how many days of expenditure are involved. Even if some of the days are partial, note those down since you will need to spend money on those days as well.
2. The number of meals needed
Food is one of the most straightforward expenses you will need to budget for. Although this is a variable (who knows what you will eat for each meal? – more on which, later), you still know how many meals you will need to have. A few things to keep in mind here :
- Is breakfast is included as part of your stay at your place of accommodation?
- Are meals provided on flights? (assuming you can stand airline food, of course)
These may be meals you don’t have to budget for as they are already provided.
What you will end up with is a list resembling this :
e.g. for 4 nights
Incoming flight at 10am, outgoing flight at 2pm
4 breakfasts (breakfast provided on incoming flight)
4 dinners (dinner provided on outgoing flight)
3. Planned activities
Any planned activities such as tours are fixed costs. Note these down.
Some of these will insist on payment in cash only, not necessarily in the currency of the country you are visiting (e.g. some tours ask for payment in US dollars only). Remember to take these into account when changing currency!
4. Other fixed costs
There are typically some other costs which you will know of ahead of time, or at least have a rough idea of. Classic examples are transportation costs to/from the airport and possibly mobile phone card costs. Note these down as well since they are generally known values. A google search like ‘prepaid SIM card cost in [insert place]‘ will bring up many threads that will give you an estimate cost.
5. Estimating daily costs
This is where things get a little tricky – you have pretty much removed the costs which are static. Now we try to estimate the variable costs as best we can.
To do this, we need an estimate on the daily costs of living in the places you will be visiting. You can find this on websites such as Expatistan (www.expatistan.com). The information there is crowd-sourced and should give you an idea of the daily costs for various activities on your trip.
The easiest variable cost to deal with is meals. You already know how many meals you need for each meal (breakfast, lunch, dinner). Using the information taken from the website, you should be able to calculate an estimate of how much your meals should cost. A few tips here :
- In some cases (typically dinner) you may find more than one cost option listed on your cost estimate website (e.g. a meal at a budget restaurant vs a 4 course meal at an Italian restaurant in an expat area). Always use the more expensive choice in your estimates. Overestimating is good.
- I find that budgeting dinner for 2 people is a good idea, since this puts you in a position to pay for a possible partner or date. At the very worst, it will mean you can manage a more fancy dinner or have a bit of spare cash on hand, never a bad thing. Think about those lovely seaside dinner places on holiday.
7. General daily activities
The next is a list of general daily activities you might undertake. This can be a bit tricky but typically, there are few things that will get done every day on a holiday. Examples of these are :
- a cab ride
- a museum trip
- sitting down for a coffee at a cafe
Of course, this varies from person to person and you should tailor this for the sort of things you might do daily while on holiday.
The general idea is if you think you might do it, then factor it in. Err on the side of caution. Multiply this estimated daily cost against the number of days your trip is and you have another estimated cost dealt with.
8. Daily spare cash
This might be the hardest thing to estimate but looking at the rough costs of various things the website gives you for the place you are going to will give you an idea of how much this can be. Multiply this by the number of days you are spending in the place and you should have a buffer of spare cash, just in case.
9. Adding it all up
Add up the fixed and estimated costs for your trip and round up to the nearest. Again, overestimating is good. You now have the estimated amount of cash you need in foreign currency.
10. Currency conversion
The final step is to calculate how much you will need of your own home currency in order to change for the foreign currency or currencies you will need. I use currency conversion websites for this (e.g. Oanda) and then add another about 15% on for the amount of home currency I should exchange. This is to take into account getting a crappy exchange rate at the money changer.
Hopefully, this should give you a workable sum of cash to use at your destination. In practice, I typically end up with a bit of extra cash which I have to change back to my home currency. While this isn’t terribly efficient since I almost definitely lose some value in changing currencies back, I’d rather have extra cash at the end of my trip and be prepared for contingencies than find myself short of cash.