Wondering how to save for a vacation? If you’ve had enough of staying at home and are already thinking about your next getaway, now is the perfect time to start planning for your adventure. If you’re anything like us, you might be craving a much-needed getaway. Whether it’s a road trip, sipping cocktails to the sound of ocean waves, a mountain resort, or a chance to practice those language skills, taking steps to save for a vacation is essential for you to enjoy it without worrying about how you are going to pay for it all.
The Value of Learning How To Save For A Vacation
Research has shown travel and tourism are significant spending priorities for Americans. According to the US Travel Association, in 2019 the total domestic and international inbound traveler spending in the US was $1.1 trillion, which in turn generated a total of $2.6 trillion in economic output. Not only can taking a vacation make you more creative, according to Adam Galinsky, a professor at Columbia Business School, but it can also improve health, relationships, well-being, and business performance.
With Americans spending an average of $1,979 on summer vacations, and 60% reporting they cannot afford a vacation, according to a recent Bankrate survey and the NYU 2018 US Family Travel Survey, it is important to know how to manage your finances when intending to take a vacation.
If you stop saving towards your other financial goals such as your retirement or a home purchase, the vacation will prove to be more of a headache than a much-needed relief. With that in mind, it’s key to keep your vacation goals realistic and reasonable within what you want and what you can afford. Still wondering how to save for a vacation?
Step 1: Review Your Saving Strategy
A good starting point is to review your savings strategy. This is a good idea not only when you want to save for a vacation, but also when you want to save in general. Look for budget adjustments you can make, regular purchases you can cut down on, or opportunities to earn extra income to make your savings grow. Reviewing your general spending budget can help you understand where your money is currently going and have control over where it goes in the future. The better you manage your budget, the better you can save for a vacation.
Of the 60% of Americans that reported not being able to afford a vacation, the most common reasons were having to pay day-to-day bills and paying off debt. Once you have recurring payments organized, it should be easier for you to see how much you can save for a vacation. Similarly, if you have “fun money” unallocated, traveling might be a good way to put it to use. A financial planner can be of great support when going over your finances so the planning process is not stressful and restrictive for you, and can help you set smart saving goals.
Step 2: Open a Dedicated Savings Account
Once you have an idea of the amount you can save, you should open a dedicated savings account for vacation. This will make it easier to know how much money you are setting aside for this specific purpose. If you want to make it even easier, you could even set up automatic payments after payday every month and treat it like it’s another bill to pay. So if, for instance, you know you have $300 per month unallocated that you want to save, you can set an automatic monthly contribution with that amount and in 6 months have $1,800 saved without you having to do much.
Having separate savings account for travel with your partner can put into perspective how much you can save jointly and what you can afford. Deposit any $1 or $5 bills you receive as change or any extra money, such as birthday cash or a work bonus. Talk to a financial advisor. They’ll be able to help you determine the best strategy and plan to save, and encourage you to set a realistic budget that ensures your money is being allocated to your specific goals.
Step 3: Budget Your Estimated Costs
If you have a clear idea of the vacation you want, it will help to budget what you estimate to spend and have a rough idea of how much it is you will need to save. Researching the costs of airfare, accommodation, transportation, meals, activities, and souvenirs can help you total these costs and have an estimation of the funds you will need. Doing it early can also help you save by taking advantage of deals and knowing how long you will need to set money aside for, and how much.
Planning and creating an itinerary will not only make it easier for you to know how to save for a vacation, but it will also help you stay motivated. A recent article by The Atlantic highlighted the boom Pinterest has had among people who are looking into going on vacation after the COVID-19 pandemic restrictions are lifted. This motivation, as the background image on your phone or computer, or a Pinterest board, can help as a reminder of why you are saving and choosing to allocate your money to that.
Time to Pack Your Bags!
Saving for a vacation is easy.
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Real financial planning should pay off today, and in 10 years' time.