It’s a new year and new resolutions to travel more, but before we start dreaming of the next locales, let’s look at some practical money advice. In this post, I answer some common money questions on how you can save for that next getaway.
How do I know if I have enough money saved for vacation?
The old-fashioned rule of thumb was to save a week’s worth of salary for one annual vacation. However, times have changed and with it the immense budget-friendly options to travel in style and efficiency. With that said, there is no set formula to figure what is best for one vacation because everyone’s personal lifestyle is different.
The best option is through planning and estimation. For instance, deciding in advance on which lodging to stay in and the price per night for the length of stay and adding on the other expenses like flights and car rentals to the overall cost of the vacation. What hurts most travelers is the possibility of underestimating certain expenses or splurging on unplanned expenses like that extra round of shots. As a rule, add money to the budget to cover such expenses should you go over.
I have just enough money, but not too much. Should I put some of my vacation expenses on a credit card? I get rewards though.
You shouldn’t be going on vacation just yet anyways.
Seriously though, even if you make timely payments and you get great rewards on return, placing your travel expenses on your card because you’re short on cash is NOT the wisest idea. You would be paying much more due to the finance charges and interest per transactions. To put in a numerical perspective, you could end paying 50 to 100 percent more for one purchase! Like that last-minute souvenir that cost $19.95 could wind up costing you $39.90 when you decide to pay for it on the next statement. Why do that?
But if you must, be sure to make the payment to pay off the travel-related expense before the extra charges like interest kicks in. It’s the most efficient, responsible way and if it applies, gives you a chance to nab reward points on airlines, hotel chains, or car rentals.
I just got my tax return. Should I use it for a vacation?
That depends because it is a personal choice. My personal recommendation is not to use all of it but rather matched it to an existing vacation savings or use a percentage of the total amount. For example, and in regards to the percentage idea, stash 75% into an emergency savings account or a high priority expense (like a much necessary down-payment for a car) and the 25% towards your vacation.
That way, you have your return work for you and don’t splurge your entire tax refund on your vacation unless of course, you don’t mind.
I want to go on vacation but I don’t think I’ll ever go. I’m not rich and traveling is so expensive. Please help!
Whoa, chill out dude. Have you heard of an awesome service call Home Exchange? You can swap your home with a fellow traveler and stay at their house for free provide that they live in the same destination you wish to visit. The idea is to trick out your profile with natural light photos of your home (make sure it’s clean and organized) and a detailed and inviting description about it. This will entice your future swapper into trading spaces!
I wrote a post in the past that list other ideas to travel cash free. Be sure to check that out for more details.
You think I should open a separate savings account for vacations only?
Why not?! Especially if you plan on taking a vacation at least once a year. First, figure out how much money you would like to set aside and is it affordable for your current budget. You may have to sacrifice your daily coffee at Starbucks- Oh No! – but that massage on the beach sands sounds more appealing than the regular hot bean juice you can make at home at the fraction of the cost. I’m just saying. Making these kinds of sacrifices can add up quickly giving you extra bucks to pool into your savings.
The best method is to set that determined amount and have it automatically deducted from your checking account each month so you can forget it until it is time to use it. It may not be a lot in the long run but it is enough cash to supplement an existing set budget or travel expense. The point is steer you from dipping your hands from your travel funds jar.
How do you save for vacation? Do you have an interesting way of saving cash or do you travel cash-free? If so, post it in the comments and let’s start the dialogue!