How to Start a Travel Fund
PUBLISHED: Dec 8, 2013 6:42 PM
One day a rich merchant said to his young son, “Son, I have an important question to ask you. Think carefully before you answer.”“Yes father.” replies the eager son.
“I will give you the total amount of one penny doubled each day for one month or a million dollars cash right now. Which will you choose?” the father asks with a sly grin.
The son answers without hesitation, “The million dollars of course father.”
The wise father looks at the boy and with a knowing smile takes out paper and pen. “Son,” he said quietly, “Come sit next to me and learn a lesson about wealth and patience.”
Faced with the same question, which would you choose the million dollars cash or the total amount of a single penny doubled each day for 30 days?
Let’s study the power of a penny doubled.
We’re going to take that one shinny penny and double it each day for 30 days. Believe it or not, we’ll end up with much more than a million dollars.
Day 1 – $.01
Day 2 – $.02
Day 3 – $.04
Day 4 – $.08
Day 5 – $.16
Day 6 – $.32
Day 7 – $.64
Day 8 – $1.28
Day 9 – $2.56
Day 10 – $5.12
Day 11 – $10.24
Day 12 – $20.48
Day 13 – $40.96
Day 14 – $81.92
Day 15 – $163.84
Day 16 – $327.68
Day 17 – $655.36
Day 18 – $1,310.72
Day 19 – $2,621.44
Day 20 – $5,242.88
Day 21 – $10,485.76
Day 22 – $20,971.52
Day 23 – $41, 943.04
Day 24 – $83,886.08
Day 25 – $167,772.16
Day 26 – $335,544.32
Day 27 – $671,088.64
Day 28 – $1,342,177.28
Day 29 – $2,684,354.56
Day 30 – $5,368,709.12
The moral of this story is that every little bit counts. If you can only afford to put $50 in your account every month, do it anyway. Over time, this little bit will add up to be a lot.
At the end of a year, if you save $25 a week, you’ll have enough money to travel to just about any country in the world using amazing travel websites like the Flight Deal, which publishes fares that are under $.06 a mile. Save $1.86 a day and you’ve got $500 for the year. You can also take tons of mini trips throughout the year with your travel fund money if it so suits your fancy.
A few weeks ago, there was a glitch in a not-so-well known ticket portal. Flight prices were missing fuel surcharges and tickets were being sold from Houston to Israel for $285 round trip, $130 from New York to Italy, $400 from DC to South Africa among others. There was no way I was going to miss this amazing opportunity to book a getaway.
For travel deals and general travel related expenses, I keep a dedicated travel fund (in a separate bank account that I can’t see) and deposit money into it twice a month. If I ever have to pay for a flight, I have a secret stash to pull from. I rarely pay for travel related expenses from my personal bank account. If I’m in the mood for earning double or triple miles with my Chase Sapphire or Mileage Plus Explorer cards (which is always), I’ll book with those and immediately pay it off with my travel fund.
A travel fund helps keep me in check. If I don’t have the money in my fund, I won’t book it.
Here are a few tips to begin funding your next trip:
1. Open up a dedicated savings account
I prefer to have a travel fund that’s completely separate from my checking accounts. I can’t be tempted to spend what I don’t see. Make sure you don’t face any minimum balance penalties once you start using this account and spending down the money you’ve saved. It’s also useful to have ATM and online access to this account so you can withdraw and transfer funds as it keeps you from mingling your regular accounts with your trip money.
2. Automatic Transfers
Once you have your dedicated account set up, it’s time to fill it up. Set up an automatic transfer at regular intervals (I set it for a few days after my paycheck). This is super easy to set up and adds up over time.
3. Liquidate into a travel fund
Everyone I know has had a plan to get rid of a ton of things on Craigslist or eBay. Once you set up your dedicated savings account, start emptying your closets or partner with some friends to have a seasonal sale/yard sale and split the earnings. You can deposit what you earn from your sales directly into your travel fund.
4. Clean your account every month
If you have any funds left over after paying all of your bills, living expenses & funding your savings accounts, try clearing part or all of your remaining funds and transferring them to your travel fund.
Remember that every penny counts! If you ever see penny on the ground, pick it up; it could be your next ticket to see the world!