How to Budget for Vacations

With the summer months coming up, my wife and I are preparing for our annual vacation. While we are both limited in the number of days that we can take off, we always make a priority to take a week off in honor of our anniversary. We haven’t always been able to take the vacation of our dreams, but we usually do something. While I would be happy camping for a week, my wife reminds me of her constant desire to travel to new places. Sometimes I realize that I would be a boring person without her. :)

I am sure most of us, if financially capable, would love to travel the world. Yet, it’s not always that easy, is it? Are you left wondering how to balance staying within your budget, while also not missing out on your life? Budgeting for your vacation doesn’t have to be complicated – but it something you should be attentive of. The last thing that you want is to pay for a vacation with your credit and be forced to pay for it over the next year or two of your life, while constantly “kicking” yourself for letting go.

How My Wife and I Budget for Vacations

My wife and I take a rather relaxed approach to paying for our vacations. Again, while we typically do not go all out for our vacations, we do usually spend between $1,000 and $2,000 each year. This is a small luxury for the many sacrifices we make during the year. We don’t make a lot of money each month and we know that there is no way that we can pay for the entire trip in one month. Can anyone?

The trick for us to pay for our vacations ahead of time is to spread out the expenses. For our vacations, there are usually 1 or 2 big expenses. The first is our accommodations. Regardless of where we are going, we have to sleep somewhere and this is often the most expensive aspect. It’s also important to point out that housing accommodations usually require a reservation and deposit. An easy way to relieve our expenses during the month we actually take our trip is to pay for the housing months in advance. While this uses up our free cash in another month, it keeps us from overspending on both months. I have found this helps me enjoy the trip even more. Not only is the trip paid for ahead of time, but it has been gradual over several months.

Other Ways to Budget for Vacations

Split Up the Cost Evenly: Another practical way to avoid having to pay the entire amount of the vacation in one month is to add up the total cost of the trip (for example $1400) and divide it by the number of months left before the trip actually happens (let’s say 7 months). This comes out to a monthly fee. In our example, it means that you have to pay $200 per month for this trip. It can sound a lot better than the total price of the trip. While I think this is a legitimate option for many people, I avoid this for two reasons. 1) You generally can’t pay for it this way. Like I said, there is usually a pretty hefty deposit. This means that managing your finances for this trip just got a lot more complicated because you are recording expenses on different months than they actually occurred. 2) The second reason that I avoid this route is that it too complicated. It takes a lot of work to save X amount per month. I would rather only have to keep track of the expenses for the trip for a few months out of the year – not all 12.

There plenty of other ways to budget for vacations. The College Investor polled his readers a few weeks back (when I was preparing this post) and they gave a variety of responses. These vary from creating sub-accounts designated for different activities to some combination between savings and budgeting.

How do you budget for vacations?


16 Responses to How to Budget for Vacations

  1. YFS says:

    I tend to treat my vacation fund like a monthly bill. I automatically send 1/12th of the amount needed to our ING direct account. So, there is basically no thought or issues come vacation time.

    • 20sfinances says:

      That sounds like a great way to do it. It keeps you saving for it and it doesn’t require a lot of attention. Nice!

  2. We just save monthly for travel. We don’t take one big vacation per year but many small ones so this method works better for us. Whenever a new travel opportunity comes on the horizon I try to estimate the cost and adjust our savings up if necessary to meet the estimate. For the type of travel we do, it’s nearly impossible to pay much in advance. This weekend, for instance, we drove to a wedding. We paid for 1 night in the hotel and the gift in advance, but the other night in the hotel, our gas, our food, and our entertainment had to be paid when we used them. So the constantly-supplied savings account is better for us – and simpler, as we have the financial structure in place all year.

    • 20sfinances says:

      That makes a lot of sense. It’s important to have a system that works for you – not superimposed on you.

  3. bogofdebt says:

    We are going to be going on our first ever vacation together next July–it will actually be our honeymoon. So we are saving up for the honeymoon monthly by taking $100 from each payperiod and setting it aside. Sometimes we can contribute more and that just helps us reach our goal that much sooner. We have a goal to have the honeymoon paid for in March and then will continue to save for the wedding and spending money for the honeymoon.

    • 20sfinances says:

      Establishing financial savings goals is a great way to keep you motivated. I’m a huge fan! Keep up the work and enjoy the honeymoon.

  4. We just set aside money whenever we get a chance. I’d like to have a set amount budgeted and sent to our travel fund to get it all plumped up, but we’re just not in a place to do that…yet.

  5. With kids, vacations (other than familiy ones) are few and far between. If we did take one, we’d pay cash.

  6. I really don’t get to go on a lot of vacations, so I’m not too sure what to say about budgeting for them, but as of right now I have a vacation fund with ING that gets $50/month contributed to it. I don’t know whether that will go very far when I go to NYC but I’ll try and make it stretch!

  7. My girlfriend and I have agreed on a new way to budget for vacations. Since we basically have everything we want/need, we have decided to pay into a vacation fund in lieu of gifts. So if come Christmas we decide to spend $200 each, we put that money into the vacation fund. We still get each other a small gift, but the real gift is the experiences of vacations.

    We also both contribute $100-$200 per month into the fund as well.

  8. […] How to Budget For Vacations via 20′s Finances […]

  9. […] it comes to vacation. Those glorious work-free days are so few and far between, it’s criminal. 20s Finances looks at the basic expenses of a vacation and how to make even a meager salary […]

  10. Savvy Scot says:

    A LOT of our savings go into Vacations. We want to open a Scuba School one day and need to find the perfect location! :)

  11. I budget by saving a percent of my salary and automatically depositing it into my vacation fund each month. 😉

  12. This is a little unorthodox, but I do it a little differently. I open up credit cards about six months before the vacation and get lots of miles. I am often able to pay for the hotel and/or airfare or at least pay less for them. This makes the vacations significantly more expensive.

    The problem is that you need a lot of time to plan it out and you need to be able to take a few dings on your credit score, which thankfully I can do.

  13. […] Before you say yes to be in a friend’s wedding, you may want to consider all of the associated costs of being in someone else’s wedding. If they are close enough of a friend, it may not be much of a decision but this should still help you budget for the upcoming expenses (similar to budgeting for vacations). […]

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