For young people, getting out and seeing the world for a significant length of time can be a really worthwhile experience. World travel can not only be a lot of fun, but can also provide you with a valuable opportunity to develop personally. Taking yourself out of your comfort zone and experiencing new cultures can help you learn more about yourself and put you in a better position to cope with difficult situations later in life. For example, employers are often impressed by job candidates who have gone out and challenged themselves, particularly if they can demonstrate that they had to support themselves financially.
Although a lot of young people recognise that taking time to travel is a worthwhile thing to do, many feel that it is out of their reach financially. Travelling for an extended period can be quite expensive, particularly with the costs of transport, accommodation, food, and entertainment. However, if you prepare yourself well, you give yourself the best chance to take advantage of the opportunity of world travel. The key to this is ensuring that you effectively budget and save before you set out. More than this, you also want to make sure that you have taken the time to work out how you will budget your expenses while you are travelling, and also whether you need to find a way to support yourself along the way.
In this article, we take you through three case studies to help you work out how you might be able to finance your overseas travel. The case studies we will look at are:
- Creating a saving and budgeting plan
- Saving more money with a second job
- Working while travelling
Creating a saving and budgeting plan
If you want to plan a long trip overseas you are almost certainly going to have to take at least some time to save up some money to fund yourself. There are two key steps to take in doing this:
- Work out a rough budget for the trip as a whole
- Create a savings strategy to meet your projected budget
We will take you through an example of someone going about these steps with real figures so you can get a realistic sense of how you might implement these steps in your own plans.
Budgeting for your trip
When trying to save for a large trip, you want to try and first work out how much the kind of trip you want to take will cost. This will be different for everybody and will be dependent upon things like how expensive it is to live in the countries you want to travel to, or the kind of accommodation you want to stay in. Creating a checklist of costs can help you calculate an overall figure.
Here is an example of what a travel budget might look like for a 6-month trip through South America. The figures are only rough estimates, based on a moderately budgeted trip (i.e. staying in hostels, budgeting food etc.)
Travel Budget Checklist
|Entertainment (nightlife, tourist activities, etc)||$1,000|
Implementing a savings strategy
Once you have worked out a rough estimate of the cost of your trip, you can then begin to come up with a strategy for saving up for it.
A good idea is to set up a designated savings account that is separate from your normal spending account. By separating your money, you will have a clearer idea of how much you have saved, and you can stop yourself from unnecessary spending.
When setting up a savings account, you want to make sure that you are getting an account with a high-interest rate, and one that also rewards you for saving money. For example, Greater Bank’s Bonus Saver account currently comes with a competitive interest rate, which you receive if you make at least one deposit and no withdrawals in a month. If you are younger than 25, you can also take advantage of Greater Bank’s Life Saver Account, which currently comes with a high interest rate. To get this high interest rate, you just need to make sure your balance increases from month to month. Setting up an account like this will mean that you are earning a really great interest rate while also being encouraged to save for your trip.
Greater Bank's Savings Goal Calculator
One tool to help you implement your saving strategy is Greater Bank’s Savings Goal Calculator. The calculator allows you to put in a starting balance and interest rate, and then set a weekly or monthly deposit amount. You can then see what your balance would be after 6 months, a year, or any other period of time.
For example, you might want to know how quickly you could reach your travel budget based on your initial savings, as well as the weekly or monthly deposits you contribute to your account.
- To see how it works, consider the example of someone called Tom taking out a Greater Bank Life Saver account with an initial deposit of $3,000. If Tom makes weekly contributions of $50, he will get the full benefit of the 2.35% p.a. interest rate.
- After 1 year, Tom’s $3,000 will have grown to $5,702 (and he will have earned $102 in interest)
- After 2 years, Tom’s $3,000 will have grown to $8,467 (and he will have earned $267 in interest)
The great thing about the calculator is that you can see the difference it will make to your savings goal if you make extra deposits. This means you have even more of an incentive to save. Check out the calculator here.
Saving more money with a second job
Taking a second job while working full time may seem like a difficult thing to do. However, if you are smart about it you can increase your saving potential while maintaining a work-life balance. A couple of key things to keep in mind here:
- Firstly, ensure that you maximise the value of the hours you spend on your second job.
- Secondly, you need to make sure to get your tax details set up correctly with your second job. While your main job allows you to enjoy a portion of your income tax-free, you need to make sure your second job doesn’t take you at the same rate as your main job, otherwise, you may end up owing the ATO money at tax time.
Here, we will go through a case study of choosing to get a second job on a casual contract.
Casual vs. part-time contract
There are a number of differences between a casual and part-time contract. In Australia, the main difference is that a casual contract comes with what is called ‘casual loading’, which means you get paid a higher hourly wage than a part-time employee. The reason for this is that part-time employees get other benefits (i.e. guaranteed working hours each week, paid sick leave, and paid holiday leave). Casual loading is effectively a bonus that you get for not having as much job security.
If you already have a full-time job and you just want some extra income to contribute to your travel savings, then the higher wages of a casual contract may be more valuable to you than the benefits of a part-time contract. To see the difference that casual loading makes, have a look at the following example:
For this example, it’s important to note that tax has not been taken into consideration. For more information on second job tax impacts, consult your tax agent or financial planner.
- Assume that Jane is 20 years old and is looking to get a second job. If Jane applies for a job at a bar, she will be paid a minimum wage determined by the Australian government. The wage is called the ‘award rate’ and it is based on the industry of the job (e.g. hospitality), the job type (e.g. basic service of alcohol), and the person’s age.
- The award rate for Jane as of January 2020 is $20.82 per hour.*
- However, casual loading for Jane in this position is $5.21. This means Jane would earn $26.03 per hour.
- If we assume that Jane works, on average, 10 hours per week for 6 months (24 weeks), the difference between Jane getting a part-time contract and a casual contract would be worth $1,250.40. This makes a casual contract a lot more valuable for Jane to save for a trip.
Not all employers may want casual employees, so you may have to look around to find one that does.
Taking advantage of penalty rates
Another way that you can maximise the value of a second job is to choose to work at times that are subject to ‘penalty rates’. A penalty rate is a higher wage that an employer is obliged to pay to you for working at specific times, including on weekends, public holidays, and at night time. The penalty rate is calculated as a percentage of the base wage, so it will depend on the award rate you are being paid.
To see the difference penalty rates can make, take the example of Jane again. Jane is entitled to the following penalty rates in her position** (remember, Jane’s base casual wage is $26.03 per hour):
|Saturdays||$31.23 per hour|
|Sundays||$36.44 per hour|
|Public Holidays||$52.05 per hour|
|Monday to Friday 7pm - 12am||$28.03 per hour|
|Monday to Friday 12am - 7am||$29.44 per hour|
Once again, if Jane is smart and organises to work in the bar on Saturdays and Sundays, and volunteers to work on public holidays, her travel savings will grow a lot more quickly. Most importantly, by taking out a casual contract and working during penalty times, Jane can save for a trip while maintaining a work-life balance.
How to make money while travelling
It may not be possible to save up all of the money you need for your trip before you go. In this case, it is good if you have the option of working while you travel. For some people, they are able to do this by doing things such as remote freelance work or tutoring high school students via Skype. However, an option available to more people is to actually work in the country they are visiting.
Working in a foreign country
Many young people, in particular, feel that they do not have the necessary skills to work in another country. But one of the most common forms of work done by Australians when they are travelling is to teach English. In many countries, no teaching qualifications are required to teach English as a second language, and teachers are highly sought after. | Greater Bank
Wages for teaching English overseas may vary from country to country, but often times teaching positions will come with other benefits such as free accommodation and free food.
If you have budgeted $12,000 for a 6-month trip but you only have $8,000 saved, you could consider stopping for 2 months along the way to teach English in a language school, for example. You may only earn $800 or $1,000 during this time, but if you are given free accommodation it may still be a financially smart decision. You could break even for that period of your trip and then keep travelling afterwards on your normal budget.
Another reason why doing this kind of work overseas can be so worthwhile is that it can actually enhance your trip. Working in a language school will probably give you the opportunity to meet more people, get to know the local environment better, and maybe even learn the local language.
* Jane’s award rate is called the ‘Level 2 food and beverage attendant’. The rate given is for someone who is 20 years old. You can check the different award rates on the government's Fair Work Ombudsman website: www.fairwork.gov.au.
** These penalty rates are also given the Fair Work Ombudsman website and are accurate for January 2020.