How to create a vacation budget

First, ask yourself this important question

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As a budget travel expert, I get a lot of questions about, well, budget travel. I take great pride in the fact that I’ve been able to visit some amazing places on a modest budget so over the next few months, I’m going to share with you all the tips I’ve picked up along the way in a series of posts called “The cost of travel.” My post today will focus on budgeting for a trip, which is arguably the trickiest part about travelling.

The funny thing is, many people think I spend a small fortune on my travel. I think I have a slightly above average travel budget, but since I believe in spending on experiences over things, I’m comfortable with what I’m spending. What I want you to realize is that you can travel on any budget. It doesn’t matter if you have $2,000 or $12,000 to spend, it’s really not that hard to stretch your dollar.

Can you afford to travel?

This is the first question you should ask when budgeting for a trip. Vacations are a luxury and by no means a necessity. If you have any outstanding consumer debt, then you should probably rethink your travel plans. It makes no sense to take a trip if you’re currently carrying a balance on your credit card and paying 19.99%+ in interest. Even if you don’t have any debt, you should ask yourself if this money can be put towards something else more important such as your emergency fund or retirement savings. You might “need” a vacation, but it shouldn’t be your #1 priority.

How much to budget

Many guides will tell you to figure out how much you need for your trip so you can start saving, but I like to take a different approach. I personally recommend setting aside a fixed amount every month; this way your vacation budget is built right into your monthly budget. As mentioned, you want to prioritize more important expenses first, but knowing exactly how much you have to spend on travel will go a long way.

I budget $650 a month which works out to $7,800 annually. This allows me to visit almost anywhere I want as long as I’m creative with my budget. Now, if you only have $2,000 – $3,000 to spend, your choices may be more limited. If you’re estimating that trip to Italy will cost you $5,000 but you have only $3,000, then obviously, you need to save more or consider a different destination. Keep in mind that this is a total budget for the year, so you can take one big trip or multiple shorter ones. Budgeting for a trip is one of the most important things you’ll do when travelling.

Creating a budget

It doesn’t matter where you’re travelling to these days it’s really not that hard to accurately estimate how much you’re going to spend as long as you’re realistic about it. The main things you need to budget for are as follows:

  • Transportation
  • Accommodation
  • Meals
  • Local transportation
  • Attractions
  • Shopping
  • Upfront costs (vaccinations, visas, luggage)

The general idea when budgeting for a trip is to consider all your costs. If you’ve never travelled before, it’s probably a good idea to budget extra since there will always be unexpected expenses that come up. The last thing you want is to miss out on an experience because you don’t have the money for it. Keep in mind that for every category you need to budget for, there are usually ways to save money. Don’t worry, I’ll share all my budget travel tips in future posts in this series. Check out my post on how much does it cost to go to Japan? to get an idea of how to build your travel budget.

Starting to save

Once you have all your costs down you can start saving towards that goal based on your timeline. For example, if you’re estimating that a trip to Thailand will cost you $6,300 and you want to depart in 9 months, then you need to save $700 a month ($700 X 12 months = $6,300). If you’ve determined that this savings goal is a bit too hard, you need to adjust your travel plans or timeline accordingly.

With that savings goal in mind, you can now start saving. How you come up with that money is entirely up to you. Personally, I cut out excessive spending a long time ago so I would have more money to travel. I’ve also heard of people who will work more hours or pick up another job just to save more money for travel. This might sound a bit extreme, but it’s a lot better than putting your travel expenses on your credit card and paying interest later.

One final tip. Separate your vacation budget into an individual savings account; this way you can set up an automatic savings plan and see the progress of your travel fund. Plus, the odds are you won’t be tempted to spend the money in this account since it’ll take away from your travel dreams.

This article was originally published on Money We Have and has been republished with permission. 

Barry Choi is a personal finance and budget travel expert at Moneywehave.com.  He has been quoted in The Financial Post, The Toronto Star, Business Insider, The Globe and Mail, and has appeared on HuffPost Live. You can follow him on Twitter:@barrychoi 

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