Planning Your Next Vacation? Create a Budget First
Budgets are great way to keep your expenses organized and when it comes to vacations, they can save you from blowing up your savings and knocking you off your financial goals. As I have grown older and started taking vacations without my parents, I have learned how important it is to plan for taking trips.
There are several ways to be financially responsible when it comes to vacation, so, let’s talk about some of my favorites.
Set a Maximum Budget
If you frequently travel or are planning for an upcoming trip, it could be a great idea to set aside a travel fund. Think of a travel fund as a savings fund for traveling!
Say you’re planning a trip to Mexico, you might start by setting a maximum budget. To figure out this number, you can start by looking at the cost of airfare, lodging, food, travel costs (Car Rental, Uber, Lyft) and so on. Once you’ve identified some of these costs, it’ll be easier to start building your budget.
What Should I Save for My Next Vacation?
That is completely up to you! When it comes to vacations, there is no right or wrong amount to spend. But, it is important to have guidelines that prevent you from using too much of your savings. For my most recent vacation, I had the following up-front expenses (after splitting with my brother):
Airfare: $359.65
Hotel: $386.25
Car Rental: $357.36
In total, I would be spending $1,103.26 for my 3-day trip. Based on this, I set a total trip budget of $2,000 permitting myself to spend about $900 on food, clothing and miscellaneous expenses. I’ll add this was not a strict budget but more of just ‘something I had in mind’.
Starting by identifying these basic costs, the length of your trip, and where you are traveling, can help you identify your average daily cost and how much the entire trip will likely cost. From there, you can set limits on how much you’re willing to spend.
Alternatively, you can budget based on your income.
2. Create a Budget Based on Your Income
This is a pretty simple way to start planning for vacations. If you make $50,000 a year and want to want to spend no more than 10% of your income on vacations every year (maybe you travel a lot), you would want to set aside $5,000 every year for a travel savings fund.
You could do this by setting aside a lump sum, or by allocating a portion of your earnings every month towards your travel fund. To reach your goal, you’d need to save about $417 dollars every month. Planning on taking one vacation and want to spend no more than $2,000 on vacation spending? You will only need to set aside $167 dollars per month.
The advantage of building a travel fund is that when you do decide to take a vacation, you can pull directly from that account and do not have to worry about if you have enough, or wonder how much you can spend.
My Advice
Make sure you are regularly setting money aside and sticking to a budget. It is best to start saving as soon as possible so that when you want to take a vacation, you have more than enough to focus on enjoying your time away. Begin by setting a goal and start saving intentionally!
There is no secret sauce when it comes to budgeting for vacations but is important to plan for them nevertheless.
