Saving for a vacation can seem daunting at first, but we promise, it’s easier than it seems. With a few simple lifestyle tweaks, investments in time and money, and a little compromise, you’ll be on your way to booking the vacation of your dreams.
Planning and saving for a vacation takes time. From solo travelers to entire families, vacationing can run in the hundreds or even thousands of dollars. So how do you make setting that Out-of-Office alert a priority? You have to maximize your savings.
Our Top Tips for Vacation Savings
Maximize your savings with less spending
First things first – if you’re going to save money, it has to come from somewhere. Make sure you’re adhering to a simple monthly budget to allocate your income according to your needs. This may mean reduced spending money while you save for your vacation.
Here are a few guidelines for setting a budget
- Evaluate your spending habits
- Calculate how much you need for spending based on your habits
- Figure out your household income after tax and determine how much is left after your monthly payments are made
- Start early – the earlier you start saving, the easier it will be to accumulate funds
- Follow the rule of thumb for dividing your income: 50/20/30
- 50% toward fixed costs, such as your rent, mortgage or car payment
- 30% toward other spending categories, such as groceries, gas, entertainment, etc.
- 20% toward savings
If your vacation requires saving more than 20% of your income each month, you will have to dip into your “spending” category to compensate.
Follow these steps to easily cut down on monthly spending
- Take advantage of library services instead of paying for cable TV, streaming services, or buying books or news subscriptions. A huge chunk of “entertainment” spending can be completely free with your trusty library card.
- Choose home workouts over a gym membership. Get your sneakers out and become a neighborhood walker or runner.
- Leave the AC off and don’t blast your heat. Take it easy on your heating, cooling, and electric and you’ll definitely see the difference in your bill each month. It’s amazing how much of an impact you can have by making simple changes, like turning the lights off when you leave the room.
- Pack your lunch instead of buying it. An easy swap to your daily lunch will save you money in the long-term.
- Make your coffee instead of buying it. Think of that morning double shot mocha latte as a once-in-a-while treat instead of an everyday expense and you’ll save all of that money for better drinks. Like a Mai Tai. On the beach.
When cutting down on spending each month, it’s important to evaluate what’s meaningful to your quality of life and what you can do without. If your weekly yoga class is keeping you sane and you can’t imagine life without it, you don’t have to give it up! Budgeting is about making compromises where you feel comfortable and getting to your savings goals the right way. You don’t have to put your life on hold just to save for a vacation. Simple tweaks will likely get the job done.
Add to your savings with extra income
While it certainly may not be an option for most people, some folks may be up for a bit of a side hustle to kickstart their savings and minimize the impact on their spending. If you can’t imagine cutting your spending, consider upping your savings with extra income. Here are a few of our suggestions:
Sell unwanted items or clothing
Clean out your closet and part with the items that no longer fit. Have extra cool items that you never use hiding in your shed or garage? Sell them online for a quick profit.
Offer your services
Cleaning, housework or freelance work can showcase your talents and bring in extra cash. Are you great with kids? Offer to babysit. Do you have a green thumb? Offer your gardening services.
Uber or Lyft
Ridesharing is becoming increasingly popular for drivers with spare time and a reliable vehicle. Just be sure to check with your car insurance company to see whether you need additional insurance.
Airbnb or VRBO
If you have a spare room, you may have the option to host travelers and meet lots of new people.
Save in a high-yield account
Once you have a steady cash flow ready for your savings account, get rid of that standard piggy bank and consider opening a high-yield savings account to get the most from your investment. A standard savings account will be around 0.10% Annual Percentage Yield (APY) but a high-yield account will step up your savings game – up to 3% APY.
Lou Haverty, CFA from Financial Analyst Insider advises the following for high-yield accounts:
“Look for a low minimum balance, limited or no fees, and association with a large brick and mortar bank. I prefer the larger brick and mortar banks because they tend to have the strongest security features for their online accounts. Savings accounts with the highest rates tend to be online savings accounts like CIT, Discover, Marcus, Ally, and Capital One.”
CFA at Financial Analyst Insider
After some time, this change will add up. This method of saving is best used months in advance of your vacation so you can get the most accumulated interest on your investment. Extra cash with little-to-no effort? We’re into it.
Set it and forget it
Experts agree — if you set up automatic transfers from your bank each month (or even every payday), you’ll be less tempted to spend that money if you never see it. Calvin Iverson, a Travel Expert at TravelPirates, recommends starting automatic deposits immediately when saving for vacation:
“Make saving for that trip easy on yourself by calculating how much you’d need to save over the next month or two and then set up automatic deposits each week or month in order to hit your goal on time. If the money never sees your checking account, you’re way less likely to spend it prematurely.”
Travel Expert at TravelPirates
You can also set up mindless habits with the help of finance apps that round up your purchases – so your extra change is tucked away for vacation. As Steven Rylans from Notiflyr.com explained, “If you spend $1.50, the extra $0.50 is moved to your savings account, making every transaction an even dollar amount. There are also apps that do this for you as well. Chime & Digit are two of the best.”
Use points and miles
If you already have a credit card that offers a great reward system for travel, take advantage of those perks. Rack up travel points and miles with purchases you have to make each month (such as childcare, gas, groceries) and redeem them for your trip. Wondering which card might be best for you? We can help you out, here.
Something financial experts don’t recommend? Going into debt for your vacation. According to Kassandra T. Dasent from Minding Your Money, LLC, “Setting aside funds in advance allows for guilt-free travel and avoids carrying the cost of a trip for months or even years as debt. It is always better to earn interest than pay interest.”
Basically, you want to be sure you can responsibly pay off that credit card if you choose to use one for travel and reward points.
Vacation Planning & Research
If you’re ready to put that saved money to use, the first thing we recommend is buying your plane ticket early. U.S. News reported that “passengers pay about 10% below the average fare if they buy 50 days before their flight.” Next, purchase travel insurance to protect your investment — vacations are a luxury worth protecting. We lined up our top picks here.
In addition to booking early and buying travel insurance, we also recommend inquiring about discounts you may be eligible for: AAA, AARP, military, government or certain state rates for any of your vacation reservations. Even if it’s not listed on their website, it’s always worth a call to ensure you’re stretching your dollar as far as possible.
Plan your spending
Once you’ve booked your travel, locked down your discounts and insured your investment, you may want to budget for the rest of your vacation-related expenses.
- Set a vacation budget. Estimate how much you’ll be spending each day and how much you want to spend on transportation, gratuities, and other typical vacationing costs. Even if you’re planning on tent camping or backpacking, you’ll still need a budget to plan your expenses.
- Assign funds for new vacation clothes and necessities. Maybe it’s been a while since you traveled for adventure or some beachy R&R. Allow room in your spending for vacation clothes, accessories and gear. Our best recommendation? Buy sandals, sunscreen, and vacationing gear before you get to your destination. These items are likely to be marked up if you’re desperate and end up perusing the aisles of the hotel gift shop.
Lastly, if you’ve decided to invest in a vacation, make sure you allow enough time to save in accordance with your unique budget. Always consider the impact on your financial future. And of course, don’t forget to have fun! You deserve it.