How to Budget for a Vacation

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Family walking on cliffside pathIt can be easy to find expensive vacation options — flip through most travel magazines and you’ll find private beaches, luxury hotels, and three-star Michelin restaurants. From a financial standpoint, however, that may not be the best way to plan a trip.

But you don’t have to sacrifice fun for affordability. With a little advance planning and an eye on your budget, you can still put together a fantastic vacation. Here are a few guiding principles to help you learn how to save money for a trip, even on a budget.

If travel is a priority, factor it into your savings plan

The time to start saving for a trip isn’t a month or two before you go away. If you really like to travel, one of the best ways to save money for a trip is to factor it into your savings plan and work toward that goal year-round. That means you might need to figure out other things to cut from your budget, such as a gym membership or some cable TV channels.

This might seem like an added burden, but it can actually mean you have a better time while you’re away. There’s a growing body of research showing that saving up and paying for things in advance actually increases your enjoyment of them.

Budget by the day, and be specific

When you put a travel budget together, do some research and estimate how much you can spend each day. That means visiting hotel, restaurant, and museum websites to check prices in advance. Also, leave yourself a cushion. Travel can often cost more than you think, especially if you face unexpected costs such as change fees for a plane ticket.

If you’re planning an overseas trip, factor in how much travel will cost based on the currency exchange rate. Your buying power may be greater or less than home, depending on where you go, because of the exchange rate. If you’re flexible on where you go, you may find a certain country or region could offer more “bang for the buck.”

If you’re going with a group, consider a travel agent

Information on the Web has vastly simplified the process of booking trips without a travel agent, but for large groups, they can be a good option. Agents can generally book air travel together and find the right lodging options to accommodate your party. Even better, traveling in a group almost always gets you volume discounts.

Save on meals where you can

Eating every meal out can get expensive quickly. Wherever possible, try to stay at places that reduce the burden, in small or large ways. Some hotels offer a continental breakfast as part of your room rate. Lining up a free breakfast everyday will add up to real savings over the course of a trip.

If you like to cook, consider staying in a rental house or apartment rather than a hotel. Most rentals give you access to a full kitchen. In some cases, shopping for food at street markets and other shops can be a great experience on its own — giving you a glimpse of how the locals live.

Don’t take on new debt for a vacation

Avoid charging your vacation on a credit card without a plan to pay it off quickly. In general, you should only borrow money to pay for things that may appreciate in value (such as a house or your education).

Sometimes people rationalize putting a trip on their credit card — without the means to pay it off — because they feel like they deserve it. They want to treat themselves to a nice experience. But there’s another way to think about this: if you come back from a trip with a mountain of credit-card debt that may take many months to pay off, you put added pressure and stress on yourself. Instead of “treating” yourself to a trip, think about treating yourself to financial health and security.

Incidentally, you can still use your credit cards when you travel (but pay attention to foreign transaction fees if you are out of the country) as they can be more convenient than cash. But you should have the money set aside to pay the balance off as soon as you get back.

If money is tight, consider a trip closer to home

Some people love to visit cultural institutions like museums and art galleries when they travel, yet they haven’t been to similar places in their hometown. Others enjoy hiking and camping, yet they’ve never visited their local state and national parks. If you can’t afford an overseas trip — or you’re saving for one next year — try similar options in your own backyard.

Bargains are often easier to line up closer to home. When planning a vacation on a budget, keep in mind that some states provide discounted entry to local parks for residents. And some companies offer deals for discounted passes to museums and other institutions on certain days — often with no prior arrangements needed. You just show your employee ID.

Last, if you’re looking for local travel options, consider the deal-a-day websites. They often offer sizable discounts on nearby attractions. (Just make sure you read the fine print to avoid any black-out dates or other restrictions.)

Putting it all together

In sum, sticking to your budget doesn’t have to mean sacrificing trips — or sleeping on friends’ couches when you travel. Figure out what’s important to you, factor that into your spending plan, save money where you can, and you’ll come back from your vacation refreshed, relaxed, and financially healthy. Oh, and one last thing: take lots of pictures. 

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