How Much Does It Cost to Tour the World? Forecasting Expenses

If planning the costs of a single trip can bring its share of challenges, then forecasting the expenses of a world trip becomes a major project. However, this is very necessary in order to avoid being caught off guard and having to abruptly shorten a long-term trip. I will explain to you my approach, and hopefully encourage you to go around the world too!

The subject I will discuss here is likely to be of interest to those who may be planning to embark on a trip around the world, because the key to successfully planning such a trip is estimating expenses and having an income strategy. 

Estimating travel expenses

Factors to consider

Many people ask me how much does a trip around the world cost? There is no categorical answer to this question as it depends on various factors such as :

• The number of people travelling : car rental and accommodations are less expensive with more people;
• The time spent away : the cost is proportional to the length of the trip;
• The countries visited : South-East Asia and South America are renowned to be cheaper than Europe, Australasia or North America;
• The number of countries visited : 5 destinations or 40?
• The mode of transport used : hitch-hiking or flying?
• The expected standard of living : staying in youth hostels or luxury hotels?

A minimal cost for minimalists

I hope that if you’re following this blog, you’re surely not interested in knowing the maximum cost of a trip of this kind, because I’m sure we agree that ‘the sky is the limit’! Rather, I can tell you that it is possible to travel around the world for a whole year for as little as 18,000 CAD – as a backpacker, using public transport, working voluntarily in exchange for accommodation… In other words travelling on the bare minimum.

Personally I don’t intend to make those kinds of sacrifices, as we are travelling with kids and need a little bit more comfort. As we hope to visit more than 40 countries and our time is limited, we prefer to pay more and make our lives easier rather than saving money at all costs. We do, however, try to maximize the value of all of our expenses.

A global estimate

As my budget is not infinite, I wanted to make an estimate of our expenses which is both comprehensive and as accurate as possible. Here is how I managed. In a previous article, I explained how I decided on our itinerary and how long we would spend in each destination. For each country on our itinerary, I have assigned a cost of life index (which you can find online), with France as a reference point having a value of 100. By weighting the time spent in each country according to the index and using the estimate of 290.00 CAD (192,93 EUR) for one day in France (including transport, visa, accommodation, food and activities), I got a final figure of 93,000.00 CAD (61.872,13 EUR) for 431 days, or 14 months. If we lower my estimation of 431 days to 365 days, a simple calculation gives the cost for one year to be 78,750.00 CAD (52.391,72 EUR).

RTW Budget

The net estimate

Seeing as I have a strategy of point collection which allows me to enjoy around 90 nights in hotels free of charge (see the articles on Travel Hacking 101 and Travel Hacking 102), I estimate saving an additional 4,500.00 CAD (2.993,81 EUR). As an aside, my reward points gain me an estimated value of 25,000.00 CAD (16.632,29 EUR), but I never would have spent 25,000 CAD for those 90 nights as I would have stayed in hotels or apartments worth 50 CAD a night on average, and so my savings estimate is only 4,500 CAD.

So, for our family of 4, a trip around the world for 14 months, in about 40 countries (rich and poor), living comfortably without depriving ourselves, whilst being conscientious about money and using points to their full advantage, we should spend as little as 88,500.00 CAD (58.878,32 EUR), or 22,125.00 CAD (14.719,58 EUR) per person. Over a 12 months period, it would be equivalent to 74,748.00 CAD (49.729,23 EUR), or 18,737.00 CAD (12.465,57 EUR) per person, which is only slightly more than what a solo backpacker would spend in 12 months! That’s what we call large-scale savings!

Note that I’m not talking about a fixed budget here, only an estimate, as I do not want to be limited in our choices to make the most of our trip.

Other expenses

I already mentioned that my estimate included transport, visas, accommodation, food, activities, basically all travel expenses. I intentionally excluded expenses relating to the equipment, passports, insurance, vaccines. You may want to read the post I wrote about the items that will accompany us during the trip. These items must fulfill as many as possible of the following 5 criteria: compactness, lightness, quality, durability and price of course!

Other ongoing expenses

Unless you’ve pulled up stakes and have bought a one-way ticket, you have to think about your return before you leave. The financial ties in your country of residence can be pretty substantial and restricting. We have decided not to sell our house and keep only one of our two cars. We are therefore renting out our house during our trip, which will help pay our ongoing expenses such as the mortgage and municipal taxes.

Estimating income during the trip

My relationship with money

There are two different types of people when it comes to taking financial decisions regarding a round the world trip: those who plan their trip several years in advance and put aside money each month to realize their dream, and those who do not need to as they already have a savings cushion. Without wanting to boast, we are in the second category. This is due to the fact that I greatly value the money I earn, which is an attitude instilled in me by my parents. My parents are refugees from Cambodia and started working from a very early age, not to buy themselves music albums and video games, but to help provide for their families. Arriving in France they worked as laborers and I grew up in low-cost housing for a period of my childhood. We never made a futile or extravagant purchase, and this practice has stayed with me until now. This has allowed me to offer my family a comfortable quality of life for the lowest cost. So no, I didn’t win the lottery or receive a substantial inheritance!

The main source of income : our savings

You ask yourself how did I manage it? I simply decided, very early on, to take charge of my finances in order to gain financial freedom, which the government will probably not even offer me at 68. The decisions consisted of regularly putting aside money and making educated investment choices. When we decided on an impulse to go on a trip around the world as a family, we knew we had the means to do it. Since financial freedom and material goods are not ends in themselves, it was not difficult for us to decide to use our savings. My retirement will simply be a little delayed.

The second source of income : the government

Even if the Socialist Republic of Quebec was not part of the member states of the former USSR (without wanting to belittle the latter), it still retains vestiges of the fact that it would have liked to enjoy the former glory of the motherland. As a result, Quebec is the most taxed province/state in North America which benefits the less well-off, and allows us at the same time to take a sabbatical year partially “at the expense of taxpayers.” Because it’s true, we will not need a large family income to live comfortably during our trip, as our kind socialist government is helping us finance our trip.

Our government grant in figures

It’s not always easy to make a precise budget when getting a gross salary and there are a lot of criteria that can vary our salary at the end of the year. As luck would have it, our government has provided a calculator to help us overcome this problem.

As Jessica has been a joyful housewife since the birth of our son Mateo, I am the sole earner in the family. With our family-specific criteria, I used the calculator in an unconventional way to find the maximum income I should earn in order to maximize the credits and grants that our two levels of government could give us. Per 1,000.00 CAD (665,29 EUR) of gross income for a tax year, I collected the annual net income for our family’s configuration of 4.

Total annual net income per additional $1,000 gross income increment

I will interpret for you the incredibly burlesque result of this exercise:

• By not working, we would get the net sum of $30,059, principally from social assistance and child benefit;
• With a gross income of $100,000 we would get the net sum of $75,140;
• I would have to earn $53,000 to get a net sum of $53,000
• Each dollar earned between $35,000 and $60,000 would be taxed at over 60%!
• The net profit between $47000 and $48000 is only $119, i.e. a tax rate of 88% !!!
• Working for $35,000 would end in receiving $48,992;
• Working for $60,000 would end in receiving $55,595;
• If I earned $ 35,000 and received a gross increase of $25,000, it would only amount to $6,603 net.

I can conclude that there’s not much point me earning more than 35,000.00 CAD (23.285,21 EUR) during the two consecutive years we will spend away, which I never thought would be the case in my life! I will therefore try to earn this amount before we leave, as well as when we return, for the tax years 2018 and 2019. It’s true that most grants in a tax year are paid starting July of the following year. But it will allow ourselves to live on our savings all the same!

Do you now understand why I like numbers?

Bonus : more numbers

I ended up stimulating my neurons with other simulations, just out of curiosity. Even though it has nothing to do with the subject, I will reveal to you the fruits of my research:

• A single person has to earn $71,000 gross to finish with the same net amount that the government will give us, namely $49,000;
• A couple without children who do not work receives $13,757;
• A couple with 2 children who do not work receives $30,059;
• A couple with 2 children with one full-time minimum wage income will receive $41,681;
• A single mother with one child who does not work receives $18,503;
• A single mother with 2 children who does not work receives $26,479.

I’ll let you interpret the numbers, but I can safely say we’re well looked after in Quebec! Be careful though! This is not an incentive to take advantage of the system. I loathe people who do it. I find that the system is flawed as it does not encourage people to exceed and excel. I am nevertheless happy to be able to enjoy it as a good taxpayer.

Conclusion

Now you have the methods and tools to estimate the financial aspects of your future world tour yourself! But remember this: on a trip, just like in real life, it’s not how much you win, but how you spend your hard-earned money. Now it’s your turn!