Financial Planning for Vacations

If you’re dreaming of your next vacation, you’re probably also revisiting your finances. Luckily, with the help of some strategic planning and a few simple rules-of-thumb, financial planning for vacations can be smooth sailing.  

Define your vacation goals 

When we discuss financial planning for vacations, we’re really talking about basic goal setting and saving. What kind of travel are you saving for? Is it important for you to travel annually, making frequent, smaller trips? Or are you focused on a one-time mega-trip? Whether it’s spring break in Florida or the EuroTrip you’ve been dreaming about since high school, defining the goal will guide the kind of saving routine you’ll need to establish.  

Of course, to plan your savings, you’ll need to have an idea of how much your trip will cost, and how much of your annual budget you want to spend on travel. And remember you’ll want to err on the side of saving more. When we’re relaxing on vacation, we all tend to spend more than we think we will!  

Start budgeting, start saving 

Your travel plans, particularly your timeline, will determine your budgeting strategy.  

• One-time trip. For a one-time trip, estimate the total cost, and divide that by the number of months you have to plan. That will be your target savings for each month to ensure the funds are there when it’s time to book. 
• Annual travel. If you’re thinking about consistent, annual travel, consider how much of your total budget you want to commit to vacations, divide that number by twelve, and that will be your monthly contribution to the travel bucket. 

Next, set up your travel savings account.  

• For annual travel or a trip planned sometime in the next two years or less, you will want to keep those funds in cash in a high-yield savings account. Then, when you use your credit card to book travel or while you’re on the road, you’ll use funds in this account to reimburse yourself.  
• For bigger trips further down the line, a savings account may not be the best plan. You might consider some middle-term investment strategies.  

Using your credit card rewards wisely 

Credit cards can be great tools when financial planning for vacations, especially with so many credit card companies offering generous travel rewards and perks. Here are a few tips to get the most out of your credit card: 

• Know your balance(s). Do you have enough points accumulated through this card to pay for a flight or hotel in full? If not, do you have the funds in your vacation planning savings account to make up the difference? 
• Remember that rewards don’t pay the bills. You absolutely want to make purchases with your credit card in order to gain rewards, but be sure you aren’t spending more than you’re able to pay off every month. 
• Review the rules. Every credit card company has different rules and restrictions regarding expiration dates, combining purchases, etc. Make time to review your company’s requirements so you understand exactly how many reward points are available to you.  

Prepare for while you’re there 

This is the fun part! No one wants to go on vacation only to worry about their finances while they’re away, so here are a few ways to prepare so you can truly unplug: 

• Research when to book for the best deals. Whether you’re booking a flight, hotel, or rental car, prices can fluctuate dramatically depending on how far in advance you book. A little bit of research ahead of time can save hundreds of dollars, leaving more for fun spending once you’ve arrived at your destination.  
• Understand exchange rates. For any international travel, you’ll want to check current exchange rates for whatever currency you’ll be using while abroad. Exchange rates will greatly impact your spending while traveling, so keep them in mind when deciding how much to budget for while you’re there. 
• Credit cards and international travel. Before you leave, be sure you understand whether you can use your card internationally, as well as any extra fees that may be associated with that. Again, every credit card company is different in this regard, so it’s wise to have a backup plan. 
• Set your bills on autopay. The last thing you want to be doing while sitting on the beach is worrying about your bills back home. Before you leave, set everything on autopay so you can focus on your tan instead of due dates.  

Financial planning for a vacation requires diligence  

Finally, help yourself focus on your goals. While saving money requires discipline, a little imagination goes a long way. Stick a picture of your destination on the refrigerator, near your laptop, or wherever you need a little nudge of encouragement.  

It can be fun to daydream about a big adventure but planning for your future vacation doesn’t mean you can’t enjoy life in the meantime. As any avid traveler will attest, the real joy is in the journey. 

Whether you’re saving for a trip of a lifetime or just need an occasional weekend in the woods, we at Commas believe that financial planning for vacation doesn’t have to be overwhelming. If you want support achieving peace of mind for your next vacation, reach out to our team of financial advisors today! 

Commas is a wholly-owned subsidiary of Truepoint Inc., a fee-only Registered Investment Adviser (RIA). Registration as an adviser does not connote a specific level of skill or training. More detail, including forms ADV Part 2A and Form CRS filed with the SEC, can be found at www.usecommas.com. Neither the information, nor any opinion expressed, is to be construed as personalized investment, tax or legal advice.