Let’s be honest, vacations are NOT cheap. One vacation is generally enough for a year, but adding any more can be a bit overwhelming. The costs get even higher with bigger families. Thankfully, it is just my husband and I (for now), so it is much more manageable. Last year, we did two international trips. This year, we are doing another three international trips with a few smaller domestic trips here and there. With a bit of planning and budgeting, we are able to do this without any problems.
Know Your Budget
The most important step to planning a vacation is knowing and understanding how much you can afford. Sure, it would be nice to stay at a 5 star hotel in the heart of a city. If you can afford it without breaking the bank, then go for it! Otherwise, take it down a notch and really understand your limits and cap yourself at that. Splurging is nice every once in awhile, but you also have to be smart about it. Splurge on a fancy dinner, but make up for it by staying at a cheaper hotel. Splurge on a hotel, but maybe forgo those extra attractions or sit-down restaurants. Your budget is only known to you and only you can control it. See below for a really quick way to determine a budget:
How much excess income can you put away per month without sacrificing debt or household expenses?
When do you want to take this vacation? This will determine how long you need to save and how much.
The simple excel chart below (I will use this budget throughout the post as an example.) shows that you could save $2,000 if you put away $200 a month for 10 months. If your vacation is planned for Jan 2018 and it will cost you $1,600, this scenario will work well because you will end up with an additional $400 for any contingencies. Seems easy? Yes and no, but that is mainly due to unexpected events or simply, self control. I’ll talk more about self control later.
Once you have a budget set, you can plan out when to buy flights, activities, and hotels. In this scenario, your trip is going to cost a total of $1,600, which includes: flight, hotel, activities, spending, transportation, and food. This doesn’t necessarily mean that you are going to spend the $1,600 all at once. After all, you need to purchase your airline tickets to even get this whole thing going!
Let’s say your airline ticket is going to cost you $400 bucks. If you want to buy it in cash (via debit card), make the purchase in May. If you are buying via credit card, charge it in April (double check your credit card cycle and make sure that your new bill’s due date won’t be until the following month) and pay for it in May. Please don’t carry debt to go on vacation. I’m a strong believer of paying off credit cards in full every month. My husband and I do not carry credit card debt and reap all of the cash back benefits. Win-win.
Now that you have your airline ticket, you have an actual plan going. Yay! You’re next step is paying for a hotel. I am a huge fan of hotels.com. Why? Because I almost aways use their “Pay Later/Free Cancellation” option and this really helps me plan out my finances. I also get a free night after staying 10 nights as a bonus every now and then. Sometimes, the “Pay at hotel” option is a bit higher than the “Pay online now” option, but it’s never a huge gap. And, with proper budgeting, it shouldn’t be too big of a deal. Since you won’t be paying until you check in/out, you now know that you won’t have to pay for it until the month after vacation. In this Jan 2018 scenario, you won’t pay for it until Feb 2018. Every now and again, you will see the “Pay online now” option or “Reserve with deposit”, I usually don’t do these unless I absolutely want to stay at this particular hotel. Otherwise, I close out and find a different hotel.
Now that you’ve booked your flight and hotel, it is time for the activities. You already spent the first two months worth of savings on your flight, now it’s time to save some more. Since your vacation isn’t until Jan 2018, by Aug 2017, you would’ve saved $800. That should be more than enough for activities for a $1,600 trip. Same as before, buy via debit card in August or charge in July and pay for it in August.
Now that your flight, hotel, and activities have been booked, it’s time to save, save, save! By the end of Dec 2017, you will have saved $1,200. This should be enough to cover your hotel, spending, food, and transportation costs. At this point, it’s all about making sure you keep to budget while on vacation. You already know how much your hotel will cost you, so subtract that from the $1,200. The remaining amount is for food, shopping, and any additional transportation costs (uber, trains, etc). This is how your budget should look after vacation:
You can either spend the extra $400 or put it away for your next vacation! Ofcourse, this all works out with self-control, which leads to my next point.
It is really easy to make a plan, but it’s the execution that is difficult. If you know you have to put $200 away every month for your vacation, find a way to make it simple and less intimidating. My husband and I bank with Ally bank and utilize their multiple account functionality. We have a few accounts set up for different purposes. One of our accounts is specifically for vacations and we named it our “Vacation Fund”. If you can keep a separate account to put your vacation savings into, the whole out of sight, out of mind concept really works.
In this scenario, you know that you have to save $200 a month. If you get paid bi-weekly, why not put $100 per paycheck instead of a full $200 at the end of every month? It makes it less intimidating to put less away at a time than a lump sum at the end of each month.
If you end up going out one weekend and spend a little more than expected, which impacts your vacation savings, then you have to be ready to make up for it. It helps to put the money away immediately and not even worry about it.
If an unexpected event occurs during the time period you are saving, it should hopefully still be okay for you because you already incorporated a $400 cushion into your budget. If the unexpected event takes away from your full $400 contingency, it’s best to re-evaluate and either put a little more away a month to make the money back, find a cheaper hotel and re-book, or lessen the number of activities you had planned.
I talk about using a credit card a bit above. Our travel card is the Barclaycard Arrival Plus. Since we travel frequently, it satisfies our needs. There is an annual fee of $89 dollars. It has no foreign transaction fees, which is a plus and the cash-back is pretty good. In the past year, we’ve been able to redeem $100+ in statement credits. Not bad! 🙂 As I mentioned previously, credit cards aren’t for everyone, but for those who are comfortable enough to use them, it is the way to go. Just be smart about it.
There you have it. My tips on saving for a vacation. I hope you find these useful and implement some of it when planning for your next vacation. Happy planning!