Vacation Spending: How Much is Too Much?
Now that summer is here, you may be thinking “vacation.” Travel is a great way to expand your horizons and escape from the workaday world.
If you’re a young adult, chances are you make travel a high priority. One Harris Group study found that 72 percent of millennials prefer to spend more money on experiences than on material purchases. According to another study, they’re spending $200 billion annually on travel.
Money spent on travel is well spent, but too much can turn your final destination into a financial hangover. Here’s how to avoid overspending on your next getaway:
Don’t say “charge it.” Coming home to a big credit card bill that takes months, or longer, to pay off is no way to have fun. Most financial experts agree: if you must pay for a trip with a credit card, you can’t afford it. Consider taking a staycation this year and start saving for next year. You’ll enjoy anticipating next year’s trip, and the memories won’t be marred by worries over credit card debt.
Start a vacation account. Consider opening a savings account just for your next vacation. Arrange to transfer part of each paycheck into that account automatically. If you get a windfall – a bonus or a tax refund – put a portion of that in your vacation account, too.
Save then go. Farnoosh Torabi, author of Psych Yourself Rich, suggests saving two to three percent of your take-home pay for an annual vacation. You might find ways to save even more. Try cutting specific expenses to save toward your trip. For example, skip going out for lunch one day a week and brown bag it instead. If you save $10 each time you pack your lunch, you’ll have $500 by end of year.
Estimate accurately. Before you go, do plenty of research on hard-to-estimate costs like food, drink and local transportation. Those can add 25 to 50 percent or more over the cost of basics like hotel and airfare.
Plan your work. While you’re planning your trip, think ahead about your work responsibilities, too. Even though you’re entitled to time off, you can’t leave clients or projects in the lurch. Work with your supervisor to make sure key tasks are covered while you’re away. Going that extra mile will keep your career on track – ensuring you’ll have money for next year’s trip, too!