To help you avoid overspending and/or stressing about your travel plans, take these steps to build vacations into your financial plan.
Last week my family took our annual trip to a ranch in Colorado so vacations are on my mind!
Taking vacations is a healthy part of life, but if they financially strap you, they can also be a source of stress. During a vacation, the last thing you want to be worrying about is finances!
To help you avoid overspending and/or stressing about your travel plans, take these steps to build vacations into your financial plan:
1. Set your vacation goals. Ask yourself: how often, for how long, and where will you vacation? Other questions to help you narrow down the estimated costs:
Will you take several long-weekend trips or one large trip over the year?
Will you drive or book plane tickets?
Will you be traveling internationally?
Setting and defining these goals will help you begin determining how much of your income and savings you will need to dedicate to vacations.
2. Create a dedicated vacation account. To track your savings for vacations open an account separate from your everyday checking and savings. This will help you track your savings progress.
Our family also uses this separate account for all our vacation expenses (car rentals, airport parking, meals while traveling, etc.) to make it easier to group expenses under the “vacation” umbrella and ensure that we stay within our budget.
3. Determine your budget. Once you have your vacation goals set, you need to start estimating the total cost of your planned trips. Make sure you include: transportation (including both flights and local transportation like Uber or subways), hotels, meals, activities, and miscellaneous costs.
Depending on the timeline to your vacation and location, be sure to account for inflation, exchange rates, and unexpected costs. I recommend adding a 10-20% buffer to your vacation estimate.
4. Prioritize your vacations. You may have several trips in mind—prioritize your savings based on importance and feasibility, but also timeline and cost.
Planning ahead and accurately estimating your total vacation costs is a great way to determine if all your vacation goals are realistic for your budget and lifestyle. If they are not, you can adjust as needed which may require reducing or delaying some of your travel plans.
5. Create a vacation savings plan. Break down your total savings goal into a manageable amount. Consider how much total you need to save, how long you have to save, and make it a part of your monthly budget.
6. Automate your savings. Once you know how much you need to save each month, set up automatic transfers to your vacation fund. This ensures you will regularly save for your vacation and not cut corners on an impulse purchase.
7. Monitor and adjust as you save and things change. You may have to change course in your plans, and that’s okay! Remember, that is why we prioritized your vacations and planned ahead of time.
Managing and planning for vacation expenses effectively and in advance will ensure you can just relax and focus on the time away. Now you can just let loose–whether that means digging your toes into the sand at an exotic beach, taking that annual trip to a National Park, or riding horses on a remote ranch in Colorado.
Catch me live tomorrow!
P.S. Tomorrow I will cover this very topic live on Youtube, be sure to check it out. Remember, we have a live every Friday, 10am EST where we answer your questions–join us this week!