Today we are excited to feature a guest post from David Bakke, a travel junkie from Atlanta who shares his thoughts and tips on personal finance at Money Crashers.
When planning for a vacation, your ideal trip is one that has little or no effect on your daily or monthly finances. Ideally, you’ll have all of your expenses paid before you even leave the house. So if you really want to avoid the dread of the final tab at the end of your trip, you’ll need to get creative and find ways to save up for and fund your next vacation.
Saving for Your Next Vacation
1. Know How Much You Will Need
Most people overlook this seemingly simple step in vacation planning. Do you actually have an idea of the kind of money you will need? Consider writing an expense budget for your vacation – not a strict budget that ruin all of your fun, but a simple one to guide you with a general idea of how much you’ll need.
When formulating your budget, start with the basics:
- Your Method of Travel. If you’ll be driving, what’s the mileage, and what are the average gas prices on your route? If you’re going to fly, think about in-airport expenses and the cost of travel to and from both airports.
- Lodging. Will you have cheap accommodations, or will you be staying in a luxury hotel? Either way, research the usual rates, taxes, and fees, as well as the cost of food and drinks at your hotel.
- Dining. Will you be eating out the majority of the time? Or will your room have a kitchenette so you can prepare your own meals and save some cash? Plan your “nice night out” and your other preferences for eating and drinking, and consider the overall cost of each day’s expenses.
- Entertainment. You might not be able to plan every leisure activity in advance, but depending on your destination, you’ll know some of your day and evening plans, so research the costs of things like tickets and cover charges.
You can’t start saving effectively if you don’t have an idea of how much you’ll need. When you are on vacation, you want to enjoy yourself without money getting in the way, so plan in advance with a ballpark figure of your overall expenses.
If you’ll be traveling for a week, don’t forget that you’ll be saving some money elsewhere. You won’t be spending, for example, your at-home weekly budget for food, gas, and leisure. Your utility bills might be 25% lower. When you factor that in, your budgeting experience will seem more rewarding.
2. Establish a Broad Vacation Fund
You have a lot of options when it comes to methods for setting aside money throughout the year. I like to combine them all into a broad-based vacation fund including all of the following:
- Spare Change. Fifty cents a day in spare change translates into a little more than $180 after a year.
- Payroll Deduction. I usually have $20 per paycheck diverted into a savings account to be used solely for vacations.
- Extra Money. Rebates, bonus checks, and cash gifts are all “found money” that can go right into your vacation fund. You can also use one of the best travel rewards credit cards to accumulate miles and cash back for your upcoming trips.
3. Adopt a New Way to Save
In addition to those small ways to save, you’re probably passing up on some of the other basic ways to put some money aside. You can clip coupons, save on car insurance, and save money at the gas pump.
Pick a single common savings method and adopt it as a regular habit. Figure out how much this new habit saves you monthly, and allocate this money towards your next vacation.
4. Save on Vacation Expenses Before You Leave
Of course, you should search for the best airline ticket deals and shop around for hotel deals, but there are plenty of other ways that you can save money on your vacation before you leave your home.
First, consider signing up for one of the many “deal of the day” coupon websites, such as Living Social or Groupon, for coupons in the city you’re going to visit. You can find discounts of 50% or more for bars, restaurants, sports venues, concerts, and other entertainment.
Next, rather than choosing national chain restaurants for your dining, do a little research on some of the lesser known gems where you are about to travel. You will likely be able to find at least a few “holes in the wall” with great prices and great reputations in the neighborhood.
Finally, look into any and all extra discounts you can get from the credit cards you carry. Chances are you could qualify for free car rental insurance, hotel upgrades, and many other money savers just for using a credit card that you already have.
5. Temporarily Limit Discretionary Spending
One great way to ratchet up your savings is to scale back some of your discretionary spending in the months before your vacation. Are you accustomed to dining out once a week? Cut back to three times a month. A typical night out in my household runs about $50.
Start this practice, and you will have an extra $600 for annual vacation expenses. Apply this concept to other aspects of your leisure spending, and the savings could be even greater.
If you can return home from a vacation knowing that all the money you spent will have little effect on your household’s monthly budget, then you have achieved your goal. Not only will your family budget be secure, but you’ll feel more comfortable planning your next vacation, and feeling more comfortable means having more fun.
What ideas do you have for saving money for your next vacation?