Budgets aren't the most glamorous aspect of travel, but they are a necessity, unless you have unlimited funds or like to be surprised by bills. I'm fairly good at budgeting and this is what I recommend.
The sooner you start planning your trip, the better. If you're looking to rent an apartment or house, I recommend trying to book around a year beforehand, especially if you have your heart set on a specific place. You can do it later, heck you can book a trip in a day if that's your thing. But you have more options and a better chance of getting deals or savings by getting ahead of the game.
Be Honest and Prioritize
Be honest with yourself about your expectations and about the location. I, for example, place food and comfortable lodging pretty high up in my needs. I prioritize those things and I know, for example, that we generally spend $60 per person on food each day. This allows us to eat at some fantastic places, some moderate places, and some super-cheap places. You may more than happy to sleep in a hostel or eat wherever to save money.
Be honest about what is absolutely necessary to you. Is it food? A fancy private tour? A nonstop flight? Sleeping in a haunted castle? Budget for those things first and see how you can work the rest of the necessities in around them.
Be honest about how much you have to spend and look beyond the big ticket items. Little things like ice cream, museums, transit, cab fares, and spare change to use toilets all add up, too.
You're probably not going to get everything you want. This is where knowing what your priorities are comes in handy. It's easier to make concessions elsewhere when you've budgeted for your one or two "must haves."
At some point you also have to realize that what you want may not be exactly what you will get and be ok with that. Do what you can to make the trip meet your needs, but also be open other options. Maybe you can't eat at every highly rated restaurant on your list. Sometimes going to a market and getting a picnic-style meal of fresh bread, cheeses, fruits, meats, and some mineral water or wine ends up being one of my favourite meals each trip.
You can only plan so much and spend so much and after that, every trip is an opportunity to be open to some adventure.
I spend a lot of time researching, making lists, adding up mock trips to see what they might cost. I read reviews. I look at pictures. I narrow everything down as much as possible and then book whatever I can as quickly as I can. Usually this means buying plane tickets, making all hotel reservations or renting an apartment, and booking cars one after the other.
I like using Expensify. I start tracking purchases as soon as the first ticket is purchased or booking is made. Then, when I'm on the trip, I use the iPhone app to take pictures of my receipts, categorize them, and add any necessary notes. The app doesn't need to use data or be connected to the internet. When you aren't connected, it will save everything and upload the next it connects to wi-fi. It also does automatic currency conversion using the current exchange rates.
I love this app! It makes it so easy to keep track of how much you are spending in real time. It also makes it incredibly easy to fill out customs forms and declare any goods you bought on the way back.
When you are back home it's fantastic for helping you plan your next trip. You can see how much you spent on average for each category and either use that as a guideline or decide if you want budget differently the next time around.