Budgeting For Vacation

Travel has been mostly on a pause the last couple of years. However, as the world re-opens and travel plans begin to form, you may want to consider having a budget in place for your next vacation.

When budgeting for a vacation, I believe the first item that should be addressed is that a vacation could be regarded as a lifestyle expense. A lifestyle expense is an expense on an experience or material item that may enrich your life. Lifestyle expenses would be expenses that fall outside of your essential expenses.

Your essential expenses would include your food, housing, loan payments, health care, utilities, and taxes. These would be your recurring bills that should be paid on time to avoid late fees. As you consider your next vacation, it may be beneficial to review how much you make and spend so you can ensure that your fixed monthly expenses are covered as you plan for your next vacation.

The second item that should be considered is a budget and savings strategy towards your next vacation. The budget is a piece of what goes into your overall financial plan and is typically for a defined period (ex. 6months, a year, etc.) that can improve the success of most financial pursuits. To develop a personal budget for your financial goals can be very useful in managing your finances over the short- and long-term.

When budgeting for vacations, it is helpful to ask yourself the following questions:

· Will the vacation be local, cross-country, or international?

· What type of lodging and activities will you participate in when you reach your destination?

· Is it more sensible to delay the vacation this year to budget more appropriately?

The “cost” is the greatest obstacle in the way of our travel goals. When we have a firm understanding around the answers to the questions above, they will help to determine the amount of cash flow (or existing resources) that will need to be allocated towards your next vacation.

The next item to consider is, “Do I have my emergency fund in place?” The emergency fund is about three to six months’ worth of expenses in cash reserves to address short-term needs. Your emergency fund and budgeting for a vacation can be viewed as separate resources addressing separate goals. I believe an emergency fund should be in place before spending on big-ticket travels plan in the near to distant future.

So, whether you are planning for a family vacation overseas or just a long weekend to the lake up north, consider the items above and how budgeting for vacation can help to make your travel goals more realistic and attainable.