The family vacation is the highlight of the year for many people. It’s a time to explore new places and recharge. For many people, planning a vacation is almost as fun as the trip itself, and with travel planning comes travel budgeting. Accounting for your expenses in advance and saving enough money so that you can enjoy your trip instead of worrying about how you will pay your travel bills later is important.
Eighty-eight million Americans planned to take family vacations in 2018, including 35% who planned on international travel. This no doubt took a great deal of preplanning and preparation, including travel budgeting. However, as of 2017, 74% of Americans were going into debt to pay for their vacation, overspending an average of $1,108. This means that they either didn’t create a travel budget, or they grossly miscalculated their vacation expenses.
With a little preplanning and thoughtful travel budgeting, you can have a great vacation without breaking the bank.
The best way to start vacation planning is to determine what you can afford. Americans were spending an average of 10% of their yearly income on travel in 2017 as well, but you may want to plan to spend more (or less). If you manage your household expenses using the 50/30/20 strategy—50% for fixed costs, 30% for discretionary spending, and 20% for savings—then your vacation spending comes out of that 30%, which means you should allocate your vacation budget accordingly. The earlier you start saving, the more you will have for your vacation fund. Here are some travel planning and budgeting tips:
Having a travel budget in mind will make choosing a destination easier. The amount you are willing to spend will determine where you can go and how you can travel. If you prefer five-star hotels and expensive restaurants, then you will have to save more. But if you are willing to spend less on food and accommodations by using Airbnb, hostels, or even campsites, your money can go much farther.
If you’re flexible with your travel schedule and plan early, you can often get a better deal. For example, if you fly Tuesday, Wednesday, or Saturday you can often find a better fare than if you fly Friday or Sunday. You can also get better deals if you book early. For air travel, you usually get the best deals between 30 and 90 days in advance. You can also get better hotel deals if you book early and prepay, but make sure you can cancel the reservation and get your money back if it turns out that you decide to stay somewhere else. When you have some ideas as to the type of vacation you want, you can start researching options.
Start by researching the big-ticket items, such as airfare and hotels. Use online travel sites such as Kayak, Expedia, Trivago, Orbitz, and Hotels.com to compare costs. You can spend a great deal of time hunting for the best deal, so use these sites to estimate your expenses first. You can always set up travel alerts for when you are ready to book your trip.
Assuming you aren’t planning a road trip, you are going to need to get around upon reaching your vacation destination. Will you rent a car, use mass transit, or take cabs? The cost of ground transportation can add up, even if you plan to take the subway. Estimate daily costs for getting around. If you are using mass transit, see if discount fare cards are available. And don’t forget to account for transportation costs to and from the airport.
You should also establish a daily food budget. Be sure to consider whether your hotel offers breakfast and plan for lunch and snacks. If you are renting an accommodation with a kitchen, consider cooking some meals, but be sure to leave room in your budget for eating out.
As you plan your vacation itinerary, determine which sights you plan to see, and estimate costs for museums, exhibits, and attractions. Also add in some costs for souvenirs.
Consider other expenses such as airport parking, luggage fees, hotel fees and taxes, and so on.
When you set up your vacation fund, you are going to need somewhere to put that money aside for your trip; somewhere that will earn your money interest, but allow you to access it when you need it.
The best strategy is to put it into a savings account. Determine how much you want to save each week or month and move it into a savings account where it will earn interest. If you keep the cash in savings rather than in checking, you won’t inadvertently spend it.
Most banks and credit unions help you save with tools such as automatic funds transfers so that you can determine how much you want to save each month, and move the funds from your checking account to your savings account automatically. iQ Credit Union also offers the Easy Saver program, which rounds up every dollar you spend using your debit card and deposits the difference in your savings account; the more you use your debit card, the more you save.
You will undoubtedly need a credit card on your trip, so choose a card that offers travel protection. The iQ Visa Platinum Credit Card, for example, not only offers low rates and no annual fees, but also benefits such as travel insurance, travel and emergency coverage, and auto rental insurance. If you use your iQ Visa to book your trip, you won’t have to include travel insurance in your budget. The iQ Visa Platinum card also gives you 1% back on every purchase, which just adds to the money you can use for your trip.
Well-thought-out travel budgeting really is important to a relaxing vacation. Planning ahead allows you to consider all the possible expenses, and even prepay some of the bigger expenses to reduce anxiety about overspending. If you are smart about planning your trip and diligent about saving for your vacation fund, you can travel without worrying about paying the bills later.