Spring is in the air and the frozen grip of winter is releasing its hold.
Naturally, we start to dream of a peaceful salty breeze on a warm summer day. The sun setting and your feet is covered in a pile of sand. This, so they say, is the life. So you go on vacation, enjoy the vacation while it lasts and then …
One Month Later:
You open the mail. Your heart skips a beat. A ball begins to form in your throat. You fight back the tears. How are we ever going to pay this credit card bill?
This, my friends, really is not the life.
In order for vacations to be truly enjoyable you need to be sure they are proportionate to your income. Cash vacations always beat credit vacations. The best way to have a cash vacation is by establishing a vacation budget.
How Much Can You Afford To Spend For Vacation?
Step #1: You need to start this process by asking one starting question: can you afford a family vacation?
Step #2: From there you need to determine how much should you spend on vacation.
Here’s the a calculation: Look over your budget and decide (proportionate to your income and expenses) how much you should spend on vacation. For most families the recommended budget percentage is somewhere around the 5-8% mark would be appropriate. This of course will depend on a variety of factors – How much do you like to vacation? Do you have room in your budget for 5-8%? Are you willing to cut other expense in order to vacation?
Let’s imagine for a moment that you decide you can afford $2,500 for a vacation this year.
Step #3: Set up an automatic savings plan
Take your vacation budget total and divide it by 12. In this case (2500/12) you would need to be saving $210 (rounded up for simplicity) per month.
Set up this automatic deduction using something like ING Direct. Here’s some tips on how to budget with ING.
Step #4: Apply Parkinson’s Law to Your Budget
Parkinson’s Law essentially states that things will expand or contract to fit into the allotted boundaries. As an example, if you have 1 hour to do a job you’ll get it done in an hour. If you have 3 hours it will probably take you three hours.
This applies to your budget because you now need to s-t-r-e-t-c-h you budget as much as possible to get the most vacation out of every dollar.
Now you start dreaming of all the places you would like to go – just keep it within the suggest price range.
Step #5 Confirm your Budget is in the Right Range
Once you have a general sense of where you want to go and what you want to do, break down your vacation into smaller categories and be sure that you have properly accounted for all the expenses. You will need transportation, you will eat, you will tip. Sometimes when people plan a vacation they only focus on airfare and hotels, but that is only a small part of the total cost.
Visit a site like www.sidestep.com to get a general sense of the cost of hotels, airfare, and find great prices on car rentals.
As long as everything still seems set all you need to do is to stick to your savings plan and enjoy your vacation.
How to Budget On Vacation
While most people think a budget and a vacation are antithetical there are so many reasons to budget on vacation. The biggest reasons is so that you won’t spend 11 months stressed because of your one week vacation. When you’re vacationing you still need to make a budget.
The Simplest Way To Budget On Vacation
From your overall budget subtract your known and fixed expenses.
If you are budgeting $2,500 for vacation and you hotels, car, and air represent $1500 of that total you know you have $1000 left for other activities.
During your vacation just pay cash for everything and only track your ATM withdrawals. If you take out $200 from the ATM you get 5 ATM visits on vacation. This way you don’t need to keep any receipts or write down any numbers. You know that your 5th ATM withdrawal is your last $200 for vacation.
If you stick to this plan you will never have to endure the dreaded after vacation credit-card bill shock.
Photo by Lost in the RP.
What do you do to help plan a debt-free vacation?
{ 9 comments… read them below or add one }
We discuss where we’d like to go on vacation and look into the airfare, hotel, etc. Then we include the vacation amount in our budget and send whatever we have set aside for vacation to an ING account for the vacation. We have a continual ING account setup for vacations and monthly allotments already in place, we just make more adjustments depending on the cost of the particular vacation. We’re going to Rome later this month and have already paid for every detail of the trip…except shopping and meals. All cash. It feels good not to get into debt over a vacation.
A new child is a really weird variable when it comes to vacations. Since Evy’s come along, I’ve stopped working to stay at home with her so our income has been halved. Suddenly, vacations have become more than a luxury, or even a dream. So, instead of picking a vacation destination and saving up for it, we look at what we have saved, and plan our vacation according to that. It ends up being a “staycation”, but it’s fine. This will all change when Evy gets older and we can actually go places for extended times. I’m hoping that by then, Evy will be hard at work in a coal mine, printing press, or somewhere they allow child labor. That way she’ll be able to pitch in. Another good idea, is eating at a restaurant then “forgetting” your wallet. Then send the kid in to do dishes! BAM, free dinner. Every one wins!
~ND~
Last year, (my husband and I had been married only a little over a year), we took a family vacation with his parents. I knew about the vacation for several months in advance so I was able to be very careful in my spending and save up a good amount of money (for us at least.) In about three months time I saved up $2,000, which is no easy task when you make minimum wage. We knew we could sacrifice a lot to be able to enjoy our vacation. I didn’t charge a single thing to a credit card during those eight days. And the more important thing, that most people forget, I had enough money left over to supplement our expenses until our next paychecks, (remember your not working for a week, even if you do get paid vacation, have some money saved up to supplement!)
Later, I told my mom how we did it, (she had assumed that we had charged it, and would have to pay it off.) She was stunned. She and my dad have nearly perfect credit scores and have always been very wise with their money, and yet they had never done anything like that. They always charged vacations, and paid for them later. (Of course they did have five kids…) I was incredibly happy that God had provided for my husband and I in such a way that we could accomplish that debt-free vacation…
I’m rambling, I know, but I have been a little… prideful, about it. (I know I shouldn’t be!) I just wanted to encourage everyone who reads this, that a debt free vacation is the most amazing experience!
Such a great Idea! I never thought to save the entire year for a vacation…ususally we decide just months in advance and that usually makes it hard to save as much as we spend…Thanks!
P.S. I would love to win the Iphone giveaway!
We always pay cash for our vacations nowadays, it just makes the vacations that much more enjoyable when you don’t have to worry about paying them off later. For example, on our most recent trip, out east from Niagara Falls to Maine – we figured out what the trip would cost in advance including lodging, airfare, car rental and spending money. We saved up enough cash, and got out cash for spending money. When the spending money was gone we didn’t spend any more. Result? No big credit card bill to pay, but a debt free vacation!
I agree with the statement above as well that says if your budget increases, so will your expenses – you have to work hard at keeping the spending down!
I’m not a Christian, but this advice is still good. We now have the extra money to take longer vacations, but for many years, just taking a week off and staying at home WAS the vacation. I can’t imagine how anyone could truly have fun on a vacation that puts the future in jeopardy.
I would never travel and use cash exclusively for expenses. Credit cards have the luxury of being replaced if stolen, points accrued for airline miles or cashback options, and being able to handle disputes or replacements if things don’t go as planned. Cash obviously offers none of those. Keeping a ledger of expenditures is no more difficult than tallying atm reciepts.
For our vacations we tend to do roadtrips in the US or all-inclusive resorts outside of the US. In both situations, it’s about planning ahead for forseeable expenses – not whether you limit yourself to one type of currency or another.
I would like to say that this article shows us two important things.
The first one is about asking questions. When we encounter an issue or matter, we start to write down the to-do list for that. Before that, we must ask the questions about that of ourselves as well as other people.
This article starts with throwing a question: Can you afford a family vacation? There may be a more question: Is this vacation a worthy one for your family? In this respect, this article is a good example that shows us the power of fundamental questions. This good habit will make us live creative lives instead of simply consuming our lives.
The second one is about two sides of the same coin. This article is indicative of the meaning like saying, “the biggest reasons is so that you won’t spend 11 months stressed because of your one week vacation.” Everything has two sides of the same coin, so that we should properly balance them.
This article will be helpful for people preparing a family vacation.
Thanks for giving me a good opportunity to read this article.
I love the first part of asking if a family can afford a family vacation, yes before deciding to go to a vacation decide first if your family can really afford to take a vacation with other members of the family, check your budget and if you can see that your budget is just enough for your supply, then do not go. Save first money for a vacation so that you can be debt free, it can be a good help.
Do not force to go for a vacation if you know that you will just have debts later on, it can be a big problem, better prevent it from happening. Remember that it is being said that “prevention is better than cure.”
Enjoy a debt free vacation, you can read other posts here that can help you in your problem. Great article Craig.