Iceland on Budget

Iceland is famous among travelers for dramatic lava field landscapes, volcanic hot springs, and as the land of 1,000 waterfalls. It also earned itself the reputation of being a rather expensive backpacker destination.

Food, spirits, and supplies come with a hefty price tag. Most things must be imported to the island. On top of that, Iceland is catering more and more to the luxury traveler. Building gorgeous hotels with prime viewing for the Aurora Borealis and all-inclusive tours incorporating everything from horseback riding to glacier hiking.

Iceland will be far from your cheapest travel destination, but it doesn’t have to cost you an arm and a leg. The key is to think a little more like a local and less like a tourist.

***We traveled during February which is viewed as a shoulder season for Iceland. The weather can be unpredictable but you still get roughly 10 hours of daylight. AND you avoid the 1.2 million tourists that visited the small island in the summer months last year. Choosing your time of year wisely not only guarantees cheaper prices all around, but you get the picture perfect moment ALONE at every waterfall.

Getting There

****WOW Airlines. It’s an Icelandic based low-cost airline that very frequently has insane deals. My roundtrip flight from LAX to Keflavik cost me 280 USD. The downsides are you don’t get to pick your seat, they don’t serve inflight food or beverages unless you pay for them, and you are limited to one backpack to bring as a carry-on. Pack light, buy some snacks and bring an empty water bottle to fill before you get on the plane. Check out my carry on bag for Iceland so you’ll pack right + meet all flight requirements.

****UPDATE: As of April 2019 WOWAir officially went under. Hopefully one of the other Icelandic Carriers will pick up where the airline left off.

Getting Around

Tours and taxi’s are very expensive in Iceland. The bus system works for getting around Reykjavik but if your planning on leaving the city it’s completely non-existent. I found that renting a car was by far the most cost-effective way to see the entire island.

Northbound car rentals had great deals for “off-season” rentals and offered a free shuttle service to and from the airport. If you are planning on driving the Ring Road (which you should be), get a vehicle with 4WD, studded snow tires, and good insurance for wind and water damage.

Driving can be extremely difficult when the weather turns and I saw a lot of unprepared drivers stuck in snow banks. If you don’t plan on getting an international phone plan, I recommend getting the in-car GPS. Many roads in Iceland aren’t clearly named and navigating in rural areas would be almost impossible with just a roadmap.

Another option if you are feeling adventurous is hitchhiking. It’s very common in Iceland and in the summertime easy to do. I saw several backpackers attempting this in the winter-time and since cars are few and far between they usually ended up soaking wet or caught in a blizzard.

The single most important website to bookmark for this trip is the road conditions site. The website gives you up to the minute road conditions of the entire island. Including areas of wind, ice, and water on the roadway.


For me, “cheap” lodging is 20-30 USD per night maximum. Evan and I took it upon ourselves to try to make that a reality for Iceland. Most hotels in the southern part of Iceland are going to cost you around 150 USD per night and hostels around 40 USD per bed. We focused on finding guesthouses and Airbnb rentals that don’t get as much love during the winter months. Fewer people mean they are forced to drop their prices.

The key was starting our search early before all the reasonably priced homes fill up. Iceland is one of those rare destinations for backpackers that the best deals are found online and booked in advance. We ended up spending around 60 USD per night between the two of us and stayed in some AMAZING homes, including two farms. Most guesthouses had breakfast and coffee included and all had free wi-fi to plan your next day of adventures.

I highly recommend staying at the Mjoanes accommodation if you are passing through the East fjords. Free coffee, friendly dog and cats, and the host baked us the most delicious Icelandic homemade bread I had all trip. On top of that the home was in a prime location to glimpse the northern lights.

When booking hotels or activities make sure you use websites that give you a refund or free cancellation. Weather changes make roads impassable quickly leaving parts of the island unreachable. We had to cancel on our guesthouse for the Snæfellsnes peninsula when the wind picked up to 85MPH. Weather caused cancellations for ice caving tours, horseback riding, and pretty much everything else on the island. Most places refund you but it’s still good to keep in mind.

 Eating and Drinking

Eat like the locals if you want to save some cash. Every day before we hit the road we took advantage of free breakfast. Which usually consisted of bread, jam, and cured meats and coffee at our guesthouses. Then stocked up on Icelandic snacks at the local grocery store/gas station. We splurged every night on a hot dinner and some drinks so that we could try some local cuisines. Most portions were large enough for us to share.

Puffin and whale are expensive and eaten only by tourists not the locals. As whale and puffin lovers we avoided them.  Restaurant meals will cost you around 20-30 USD per plate. As for alcohol….local beers were 8-15 USD a pint and a cocktail will run you 20-25 USD. If you are on a strict budget it’s probably best to make this a sober vacation.

***Buy a bottle of Brennivin or Birch sap liquor duty-free at the airport if you want to sip on something while you’re soaking in a hot spring.


This is the easy part! Iceland is a photographer and nature lover’s dream. It’s full of beautiful mountain scenery, waterfalls, volcanic craters, and black sand beaches. And all of it is 100% free. Activities like horseback riding, glacier tours, whale watching, seal spotting, the famous Blue Lagoon, and snorkeling are pricey. I would pick a couple must-see things depending on your interests. We chose to budget two ticketed activities on this trip, a glacier hike and the Blue Lagoon.

There are many options for going on top of and inside a glacier. None of which come cheap. We opted for the 200 USD “Into the Glacier” tour which included 2 hours of glacial hiking as well as exploring an ice cave that took you down into the Vatnajökull Glacier. The glacier was vibrantly teal colored and the ice was crystal clear. This is one of the few places in the world to get this up close and personal with the melting glaciers and it was worth every penny. Our tour happened to be the ONLY one that didn’t get canceled. 85 mph winds and rain had flooded most of the caves three days before.

Blue Lagoon or Bláa Lónið is labeled as a tourist trap. It costs 100 USD for the basic entrance package which doesn’t include anything other than entrance (yes, that means no towel). That being said the water was mystifying, blue, and toasty warm. We went at 6pm for sunset and the lagoon was quiet, less crowded, and a much-needed relaxation after a long day of driving.

In my opinion, it’s definitely worth doing once. Iceland is also full of natural springs like this hidden in the wilderness that are free.

Iceland on a budget


Everyone wants a trademark handmade wool Icelandic sweater. Unfortunately they normally run about 240 USD. We managed to snag one for 70 USD by perusing the red cross and other thrift stores on the main shopping street in Reykjavik.

Budgeting Your Vacation

Possible one time expenses
  • Flight- 280 USD
  • Car Rental- 500 USD
  • Glacier Tour- 200 USD
  • Horseback Riding- 100 USD
  • Blue Lagoon- 100 USD
Daily Expenses
  • Food- 40 USD per day
  • Lodging- 30 USD per day on average
  • Gas- 20 USD per day (if payed by one person)
Cost Summary: 90 USD per day/per person + additional tours

Question? Comments? Let me know here!