Planning for a vacation can be an enjoyable process, but oftentimes even the most successful travelers may overlook their vacation budget. Setting money aside before leaving home – or even booking a vacation – is a smart strategy.
If you’re planning a vacation this year, here are some tips to that may help you stay on budget while planning your vacation to prevent running into debt over such an enjoyable milestone:
Step 1: Estimate the trip’s costs.
Determining how much a trip will cost involves research. Before departing, estimate costs for transportation, lodging, food and special activities. A daily allotment for incidentals, such as gifts and possible emergencies, needs to be factored in as well.
Here are some questions to help you estimate expenses:
How much are you willing to spend for the vacation, and does this amount fit into your overall budget without impacting other goals such as retirement?
What discounts, including age-based ones, are available to you or your traveling companions, through your employers, clubs and affiliations?
What noncash options, such as air miles or rewards points, do you have that could lower costs or provide extra benefits?
Once you’ve answered these questions, calculate the total expected cost of the trip and include incidentals.
Step 2: Build your vacation fund.
Once you’ve determined how much you need to save, figure out how much you must put away each pay period, for example, if your trip is in four months, you have roughly 16 weeks to save. Divide your savings goal, by the number of weeks to give you an estimate of how much you will need to save to meet your budget.
If the trip is a pricey, once-in-a-lifetime adventure that’s five or 10 years down the road, consider investing your money to potentially yield higher returns.
To save for vacation, some people may also want to temporarily cut back on expenses or find ways to generate extra cash. If that’s your situation, consider the following:
What everyday expenses can you reduce before your vacation? Would you consider home cooked meals instead of dining out or take out? Can you hold off on buying new clothes or concert tickets for a while?
How can you generate extra income? Through overtime or a temporary part-time job? Do you own items you no longer need that can be sold?
Step 3: Reap the rewards of your vacation savings.
Once on the trip, pat yourself on the back for following a disciplined savings plan and rest easy knowing that your long-anticipated trip didn’t sabotage your regular saving and investing plans.
For more information, contact Christine Baim, Financial Solutions Advisor — Merrill Edge of the Phoenix office at 480-384-4938 or visit MerrillEdge.com.