Published February 5, 2016|4 min read
There's nothing worse than going on the most awesome, anxiously anticipated, out-of-this-world vacation and coming home to mounds of debt as a thank you gift.Unfortunately, that's how many of us handle our travel budget, or lack thereof.
A trip that cost $5,000 to take might end up costing you close to double that once you factor in interest charges on your credit card by the time you pay off your vacation. According to American Express, over 70% of Americans plan on splurging on travel in 2016.
Splurging is great—as long as you've got the cash to pay for that splurge. Whether you plan to travel to the beach, Europe or within your state, there are four easy-to-follow steps on how to create a travel budget, so that your bank accounts will be in perfect shape for you next vacation.
Research, research, research is step #1 in creating your travel budget.
Before you start to build out the budget, you've got to know where you're going. Most people get stuck on only selecting one vacation destination, but that choice might not make the most sense depending on many factors including time of the year, climate, currency exchange rate, how much time you have off, etc.
The research phase is the fun part of travel planning, so enjoy. Come up with a list of 3-5 ideal destinations and create a pros and cons list for each. This doesn't have to be super detailed, but should contain enough information that you (or you and your significant other) can come to a consensus on which location is the "one."
Once you've selected your ideal vacation destination, it's time to brainstorm the expected costs and figure out ways you might be able to save some money. There's nothing better than going on your dream vacation and being able to save some money at the same time. Now that's smart financial planning!
Take out a sheet of paper and write down every single expense that comes to mind. If you don't know the actual price, now's the time go online and find out a ballpark price. There are certain costs that won't change and certain costs where an estimate will be as close as you can get.
There are always a few expenses that are left off every single travel budget that can cause havoc. After you've completed your brainstorming, come back to this list and make sure you've included these commonly missed expenses.
Checked baggage fees (Usually $25 a bag unless you fly Internationally)
Airport Parking Fees (Can run upwards of $12+ a day to park)
Airport Expenses (Remember to budget all those sandwiches and coffees you will buy before you board the plane)
Tips (It's always nice to tip shuttle drivers and housekeeping)
Souvenirs (Seems like a no-brainer, but it's one of the most commonly missed expenses)
The Internet (What a pain that we have to pay for The Internet. Be careful, these expenses can add up)
Travel Insurance (If you're spending $5,000 on your trip, wouldn't it make sense to insure it? Most policies run fifty to a couple of hundred dollars, but it's a small price to pay. )
Phone Charges (Don't think just because you aren't charged roaming fees at home that will be the same on vacation. Make sure you contact your carrier before you travel to get the best plan in place)
ATM (Oh, yes, you might need some cash. Don't forget to build this in your budget)
Now it's time to build your budget. You'll want to make sure you create an entirely separate budget than the one you use for your monthly budget. It's too confusing at this point if they are on the same budget—and much easier for you to go over budget.
You can easily create your budget in Excel, on paper, or even in a budgeting app that you currently use. Unlike your monthly budget, you won't have an income column in this budget. Rather, it will be a giant list of all of your expenses. Once you add up all of those expenses, then you can easily back into how much money you need to have available at the start of your trip.
For instance, if you plan to travel in six months and spend $5,000, you would need to save $833 each month to reach that goal. A great app to help you track your savings (and offers some great savings tips) is Unsplurge. When it comes to saving for your trip, you need to exhaust all possible ideas.
Here are some examples:
Can you use your tax refund?
Are you getting a bonus that you can use?
Do you have a side hustle that you can ramp up?
Can you cut out some expenses from your current budget?
Where is the money coming from?
You're almost there. You've got your budget complete and even know how much you need to save before you go on your trip. Now it's time to put it all together in your current monthly budget. This is the last step that most people forget to incorporate.
Make sure and create a line item in your expenses on your monthly budget and include the amount you need to save to reach your goal. A good tip is to set up a separate savings account, different from your Emergency Fund or normal savings account, for your trip savings. It's too easy to spend that money if it's lumped in with your normal savings.
Now all that's left is for you is to pack your bags and go on your amazing vacation. You'll want to make sure you bring a copy of your budget with you to keep your spending in check. If you prefer a digital version, check out the Wally mobile app, which will help you track expenses on the go. You can even scan in copies of your receipts to make it super easy. After all, you're on vacation; it's all about making life just a little bit easier.
Photo: Susana Fernandez
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