A poorly planned vacation can set you back months or even years on your budget. Finding the right financial plan for your vacation is probably the best way to maximize your entertainment return of investment. In other words, the following method is a useful way to help you both improve your vacation and lower your expenses.
In our opinion, it’s best to start with a big picture plan and then allocate your expenses to the seperate costs of the vacation. By paying for the big costs before you travel, you can more easily manage the money you have left to spend while on vacation. Here is the approach that we take.
Come Up With a Total Vacation Budget
Start by setting an overall vacation budget. Base this number on what you can afford and not the dream vacation you want. Of course it’s best if you have budgeted all year and already have your vacation money saved up, but for most people that just doesn’t happen. The amount you can comfortably afford to spend on vacation varies depending on how well you control other expenses and how much income you have. For a family that makes $100,000 per year, a $5,000 vacation could seem logical. That is 5%. For someone making $50,000 per year, spending $5,000, or 10% of your annual income is probably much too high. I’m guessing that somewhere around 3-5% is reasonable, but you should set your budget based on other factors too. For example, do you take vacations multiple times a year or only once every few years? And is your rent or mortgage low enough that you can save money and still spend on a vacation? There are lots of questions you should ask yourself, but do take the time to think about your budget before you start planning your vacation.
Choose Your Destination Based on Airfare and Lodging
Once you have your budget, I’m sure you already have a destination in mind. If you really want to save, you should be flexible when choosing a location. There are two ways to save here. First, if you want a specific location, like Paris, then you should look for airfare and lodging on several dates and even different months or seasons. By being flexible and traveling in non-peak times you can often find airfares that are a fraction of the price. Hopefully I don’t need to tell you about all of the great webistes out there that specialize in getting good airfare and lodging.
The second way to save is if you have a certain type of destination in mind, but are flexible on the specifics. For example, maybe you are just looking to go somewhere warm and tropical. If so, there are thousands of locations throughout the world. You can easily shop around and compare prices on airfare and lodging until you can find a great place at a great price. When it comes to great vacation spots, there are nearly unlimited destinations throughout the world. For every pricey one, there is usually a much cheaper alternative. Do your research and find the best destination for the best price.
Finally, look for good deals on your location. Often, by bundling airfare, lodging and transportation you can cut the big expenses to a fraction of what retail prices are. Just be wise and take your time searching. Don’t book the first “good deal” that you find, and try to use up as little of your budget as possible, while still finding a good destination.
Calculate Remaining Budget
Now that you’ve set your budget and found your airfare and lodging, make a simple calculation of how much money you have left from your budget to spend on daily food and entertainment. For example, if you have a $5,000 budget and you get your family’s airfare, lodging and transportation for $2,800, then you have $2,200 left to spend on your vacation. Calculate this figure and then its time to start your daily budget.
Plan Local Events Based on Daily Vacation Budget
Now that you know about how much money you’ll have to spend, you should try to start allocating it to daily expenses. For example, if you are going to a tropical location and wanted to go scuba diving and deep sea fishing, you could find out how much those items would cost and allocate a portion of your budget to those activities. With the remaining money, figure out how many times you would like to eat out while you are there, and any other museums or attractions you would like to visit. Try to make sure that you have enough money to allocate to all of these expenses. You should also put about 10-20% of your budget in a miscellaneous category for unforeseen expenses. Whether its all the souvenirs you buy, or the ungodly amounts they charge to park there, some unforeseen expenses always come up. You never know what will happen. You may have to visit a doctor or pay some other unforeseen item. Not only that, but when you are on vacation and having a good time, it’s easy to spend more on everything. You know what I mean – order a dessert, give an extra big tip, buy some friends drinks.
See What Others are Blogging About This Subject
As part of our ongoing effort to share not just what we think, but to add in a few others’ thoughts, we found the following suggestions from Independent Traveler:
5. Do a True Budget. It sounds like a government budget office tactic, but I encourage you to do a budget that accounts for money you don’t spend while on your trip. This includes food, lower energy bills, weeknight movies, Netflix or on-demand rentals, suspended paper delivery, etc. This will give you a much more honest cash-flow analysis of how much your trip is going to cost you. Don’t forget to factor in non-travel costs like boarding for pets and hiring the neighbor kid to mow the lawn; in the end, for plus and minus, you will have a better sense of what the trip actually costs.
6. Liquidate Directly into a Travel Fund. Almost everyone I know has a plan to get rid of a ton of stuff on eBay or craigslist, and almost all of them have yet to get to it. They need motivation; the decision to put all monies collected directly toward a travel fund can provide just that. Once you set up an account of some type per the above, start emptying out your closets of all your extra stuff, and fill up your dedicated travel accounts with the income. I recently sold a filing cabinet for $50, a dishwasher for $150, an old “Sports Illustrated” magazine for $37 — there’s a night’s stay at a very decent hotel right there.
You can find this article at nine creative ways to save for a vacation.
Another post from Everyday Tips and Thoughts had the following to say about minimizing vacation costs:
- Put all spare money into a vacation fund. You could put spare change or any dollar bills that you have in your wallet at the end of the day into a container of some sort and earmark it for vacation. Or, even make some extra cash recycling aluminum cans (or cashing them in at the store, depending on the state you live in.) I know this won’t entirely cover your vacation by any means unless you are camping or something somewhat cheaper. However, just accumulating the spending money for vacation in a pain-free way can be fun.
- Research your vacation destination thoroughly. Find out what time of year has the best deals to minimize your overall costs. (Not suggesting you cruise the Caribbean during hurricane season though…). Tripadvisor.com is a fantastic resource for researching vacation destinations.
- Buy an Entertainment Book for the city you are headed if you plan on eating out a lot, or if you think you will save more than what the Entertainment Book costs. (A friend of mine did this recently, and I thought it was a great idea.)
- Take advantage of any and all deals you can. Everyone knows AAA offers great deals on hotels, rental cars, etc. However, you may even get benefits from your credit card, even if it’s not specifically a travel rewards card. Check out the post “Credit Card Perks You Never Knew You Had” from Wealth Informatics to see what deals your credit card may offer.
- Earn money on the side that can be used for vacation. It doesn’t have to be something as time intensive as starting a blog, but even selling things you have around the house, taking on a holiday job, or maybe turning that hobby into a business on ETSY or something. Think about what hidden talents you have and take advantage!
You can read the rest here.
As you can see, there are lots of great ideas available on the web to help you plan and save money on your vacations.
What are your ideas about how to budget and save for your vacation?
