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Imagine this: You’ve spent the last week with your toes in the sand, soaking up the sun, watching the waves gently splash against the shoreline. As you grab your next frozen drink, your only worry is whether you want pineapple or coconut. For the last week, you’ve lived your own personal Jimmy Buffett song… and it feels sooooo good.
Returning home, you’re more than ready for what lies ahead. You’re rejuvenated! You’re recharged! You can’t wait to take action on your new thoughts and ideas!
Then, you take a look at your credit card statement.
The knots return to your back. Every ounce of relaxation is replaced by the tension that now overwhelms you. Instead of preparing your financial house before you left, you put your entire trip on credit… and now it’s time to pay up.
What a bunch of suck, am I right? Seriously, who wants to live like that?
Here’s the thing: You don’t have to. It’s entirely possible to enjoy the sweet life and avoid that crushing feeling of debt when you get home. You can travel without guilt and come home to a vacation that is totally paid for. We do it all the time… and you can too!
Maybe you’re fed up with panicking over money after every vacation. Or, maybe you’re sick of feeling like you can’t go anywhere because you “can’t afford it.” If so, these tips can help you create a simple vacation fund so you can travel without guilt and return home without stress.
Create a List of Target Destinations
Before getting started with your travel fund, it helps to get an idea of how much you’ll need to save. Having a concrete goal to shoot for keeps you motivated. It also keeps you on track for success.
Since costs at every destination are a bit different, start by choosing where you want to go. Even better, create a list of target destinations so you have a variety of financial options to choose from.
Once you’ve narrowed it down to two or three places, you can break it down further by creating a list of target hotels or condos. This is a great way to save money by finding the best deals instead of just picking a spot and going with it.
While shopping around, be sure to look at the correct days and dates. Prices can change dramatically based on your itinerary. In fact, traveling off-peak can often cost 50% less than traveling during busy times. Be sure to account for this when determining your estimated costs!
How to Save for Vacation
Building a vacation fund doesn’t happen overnight. The quicker you get going, the longer you’ll have to stock up your savings. So, let’s get started!
1) Have a Monthly Money Plan
To start building a travel fund, you need to know how much money you have coming in and going out each month. The best way to do this is by having a monthly money plan, also known as a budget.
Don’t let the word “budget” frighten you. A budget doesn’t mean depriving yourself of everything you’ve ever wanted or needed. Just like a starvation diet, a starvation budget will never last. So, wipe that thought out of your head because this budget is different.
A true budget is simply a plan for what you’re going to do with the money you already have. It considers the money you have coming in, sets aside enough for your bills, and helps you plan what to do with the money that is left over.
You can find our complete guide to starting your first budget here, but let’s take a quick look at the basics. On a piece of paper, start by determining the amount of money you’ll take home this month. Next, go though your monthly bills and write down how much you owe. Then, simply subtract your bills from the amount of money you take home. Whatever you have left is the amount you can stick in your travel fund, spend on the things you want, or save for other goals.
Your objective is to be deliberate with your money. You should “spend” every dollar in either your bills or savings categories. Doing so means you’ll have a plan for every dollar you make. Super simple, right?
To do this, all you really need is a pen and paper. (That’s what I use.) If you’d like to get a little fancier, you can try a budgeting program called Tiller. This site offers several different budgeting templates that do all the calculations for you. You can also connect your accounts and the app will track your spending. It’s a pretty sweet tool and super simple to use.
2) How Much Should You Save?
So, how much do you need to save each month to pay for your trip? I’m glad you asked.
Start by adding up all of your travel costs. This is stuff like airfare, hotel rooms, rental cars, etc. Then, add up your estimates for meals and drinks. (Personally, I find this step is easiest by determining how much you plan to spend per day, then multiplying it by the number of days you’ll be gone.) Finally, don’t forget to include any additional costs for things like excursions, nights out, and more.
Let’s assume you estimate the total cost of your trip to be $3,000. Luckily, you started planning about 9 months ahead of time. So, if you divide $3,000 by 9 months, you’ll need to set aside about $333 a month in your travel fund to have your trip paid in full.
Now, go back to your budget and pencil in $333 in savings every month. You may need to adjust the amount you’re allocating toward other expenses (like entertainment, restaurant spending, etc.) or other savings goals in order to hit your monthly goal. If you don’t have enough room in your budget, find ways to reduce your monthly expenses, search for a cheaper destination, or look for ways to make extra money on the side.
3) Automate Your Savings
Now that you know how much you need, start thinking about where to store it!
Putting your travel money in a separate vacation savings account is a great idea. This keeps your travel money isolated from your general funds, making it far less likely that you’ll spend it on other things. It’s also a fun way to watch your money grow, which can help you stay motivated!
Even better, you can easily automate the entire process! By using a technique called a sinking fund, you can automate your savings – helping you to build your vacation fund without even thinking about it.
Here’s how it works:
- Open a new high-yield savings account to save for vacation.
- Give your account a name that focuses on your goal (like “Italy Vacation Money” or “Cancun Here I Come!”).
- Determine how much time you have and how much you need to save each month to reach your goal.
- Create an automatic transfer or direct deposit that moves money to your account each month.
- Enjoy your (hopefully) debt-free vacation!
Even though we are talking about how to save for travel, you can use this technique to save for any number of different goals. Personally, we use the CIT Bank for stuff like this. Check out our CIT Bank review to learn more.
Vacation Funds: Final Thoughts
Our family loves to travel, but its soooooo much sweeter when it’s actually paid for. By implementing the tips and tools above, you’ll have enough money to pay for your next trip and enjoy your travels guilt free.
Finally, relax and have fun! You’ve worked hard to save for your vacation. Now, it’s time to enjoy it.
Until next time, happy traveling!