Building a Budget for Your Next Vacation: What You Need to Know

With fall and winter fast approaching, it’s the prime time to get a vacation scheduled on the calendar. However, in recent years, the cost of taking a vacation has increased drastically as a result of inflation amidst other factors.

Nowadays, regardless of the salary you make, taking a vacation can be an extreme stretch for the wallet. This is why learning how to build a budget for your next vacation so that you don’t accidentally fall into debt is so important. 

How Expensive is the Average Vacation?

It’s one thing to say that the average vacation cost has risen drastically, but it’s another to actually understand it. In fact, travel costs are up 9% in the last year and 20% since 2019 alone. It’s estimated that to take a one-week domestic vacation in the United States will now cost a person just around $2,000, with an international vacation costing nearly $3,000. This means that a family of four can expect to spend somewhere around $4,000-$5,000 backing out stable costs such as hotels. 

The Main Factors Behind the Cost of Travel 

Understanding why and how costs have risen so much in recent years starts with looking at the primary drivers of vacation costs. By identifying the main drivers of costs on a trip, a person can target the areas to cut expenses. These main categories for expenses on vacations include:

• Costs related to cooking food or eating out

• Transportation costs such as flight tickets, train tickets, rideshare costs, and public transportation

• Accommodation costs associated with booking hotels, vacation rentals, hostels, and more

• Activity costs incurred on vacation

• General day-to-day expenses that arise during a vacation

How to Build a Vacation Budget 101

With the above costs outlined, it’s important to learn how to reduce the actual expense associated with each category. Each of the following five budget tips are key strategies that a person can use to build their vacation budget effectively: 

1. Start by setting a max spend amount

First and foremost, the key part of any budget is setting a maximum spend amount to follow. This will help to ensure that you have a target goal in mind that you know with absolute confidence you can afford. To calculate this value, look at the discretionary savings you have built up and your current expenses. Ideally, you should be able to afford most of the vacation without dipping heavily into your savings, so try to dedicate one month’s worth salary to your trip by saving up ahead of time. While some individuals, such as those in healthcare private equity, may be able to afford more, aim to stay within your limits. 

1. Factor in activity and accommodation costs

Second, the activities and accommodations on your vacation will be the two biggest expense categories without a doubt. Therefore, these should be the first two categories you work on building out in your budget. To gain an accurate picture of how expensive these will be, book everything well in advance of your trip. 

 

1. Think of how you will get around your destination

Naturally, transportation costs should be the third item in your budget that you focus on building out. Whether you plan to take rideshare everywhere, public transportation, or simply walk around your destination, try to estimate the cost. For destinations relatively close to your home, consider taking a road trip instead of flying if you are tight on cash. 

1. Consider day-to-day expenditures

Fourth, there will be generic day-to-day costs that you are faced with quite often. While it can be difficult to estimate the cost of these into your budget, consider researching the destination you are traveling to ahead of time and seeing what the average daily estimated cost is. Take this value and adjust it based on your vacation spending habits so that it makes your budget personalized. 

1. Don’t neglect the cost of food and drink

Finally, the food cost on your trip will likely be substantial as well. Eating out for every meal can potentially be near one hundred dollars per meal, which is why setting a food spend limit is important. For those tight on cash, consider taking the time to shop for food and cook for yourself instead to save some money. 

Quick Tips for Saving Money While Traveling

Successfully building a budget for vacation is one of the best ways to save money while you are traveling, but it isn’t foolproof. That’s why picking up a few additional tips can help. Consider the following four pieces of advice to save even more money on your travels:  

• Consider different accommodations: Hotel costs will be a significant portion of your budget but consider booking a vacation rental instead if you are with your family. These short-term rentals are often cheaper than hotels on a nightly basis and can help you feel more integrated with the community in your destination. 

• Use credit card rewards points whenever possible: For those who use travel credit cards, consider using reward points in order to book flights, hotels, and even activities. This can save a person hundreds of dollars, if not more. 

• Find cheaper activities to enjoy: While you naturally want to have an exciting vacation full of new activities, you don’t want to go bankrupt doing so. Take the time to pick your must-do activities and then cut out the ones you can’t afford. 

• Set money aside well in advance of your trip: Finally, one of the biggest tips for having a cheaper vacation is to try and set aside money well ahead of time. Whether it’s a small portion of your salary or something small, setting anything aside will help.

Plan a fun and cost-effective vacation today

While it may seem impossible amidst rising prices, take the necessary steps to learn how to budget for a fun vacation. All of the above steps and tips can help a person get their vacation on a calendar without breaking the bank. Keep in mind, though, that a vacation will only be as cheap as you make it. Always track your spending when you are on a trip so that you are completely aware of the amount you have left. While watching your finances on vacation may not be ideal, it’s better than accidentally going broke.

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