Many Americans tend to slip into debt to pay for their vacations, whether they put an entire trip on credit or unexpectedly spent beyond their budget while traveling. After all, who knows when you’ll next get to treat yourself to a guided tour through Ireland or find a one-of-a-kind handmade leather bag in Italy? But the reality is this: Overspending on travel can hurt your overall financial health and even cause long-term problems, such as destroying your credit score or debt-to-income ratio.
Whether you decide to pay vacation expenses up front or use credit to cover your travel fund, it’s always beneficial to first understand your budget and plan a rough schedule ahead of time. Your vacation should be a time to relax and have fun, so planning can help you avoid the post-vacation financial blues.
Here are seven tips to minimize the risk of vacation debt and make the most of your time off.
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Create a budget. Before you do anything at all, make a general draft budget. Not only does this help give you an idea of what you need to save before your trip, it also helps you figure out the type of destination you can realistically afford. Ask yourself a few questions: Are a certain city’s attractions more desirable or affordable than those at another? Am I going to go for the more expensive option because the photos will look cooler on Instagram or because it’s what I want to do? These answers help determine costs and budget. While doing your research on locations, look into the following budget line items: travel, lodging, food, activities and miscellaneous expenses.
Start saving. A key way to avoid a vacation debt hangover is to save ahead of time. While it may seem daunting to carve a space in your budget to save for one more goal, every dollar you save now is a dollar you won’t have to rummage for later. You can figure out ways to save by looking at your monthly bills and regular expenditures. Once you have your list in place, highlight things you need in red. This can include rent, loans and bills. Next, highlight all the things you want in green. This can include manicures, coffee, nights out with friends or shopping. Now that you understand the “extras” in your budget, try to figure out how to cut costs. For example, try making coffee at home rather than spending $6 a day on that cup of fuel. If you absolutely must, you can borrow a small portion from your ongoing savings account as long as you know you can replace the money in upcoming months. Setting aside even a couple bucks a month can go a long way while you’re on your trip.
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Make sure to budget for activities. Planning a trip doesn’t require just looking at the cost of airfare and lodging. You’re most likely going to be participating in local adventures, outings and shopping. While some activities can be free, adventurous excursions, such as surfing or zip lining, can be pricey. While figuring out your budget and how to save for a vacation, do some research into local parks, must-see places or historical sites in the area you’ll be visiting. This helps you know what to expect and figure out if you can afford to see everything. While you’re at it, look into local promotions and discounts such as free museum nights to help you save a few bucks.
Book transportation thoughtfully. Look into the cheapest ways to get to and from your destination. Driving is a good option if you’re going with family or a big group, so you can split the cost of gas and tolls. If driving isn’t an option, then do your research to make sure you’re getting the best deal on your flights. Search engine sites offer you a lot more control, so you can see flexible dates, price-prediction calendars and flexible arrival options. Lastly, booking transportation doesn’t just involve buying the mode of transportation that will get you to your end destination. It also means everything included while you’re at your destination. Will you need to buy a subway pass, rent a car, take a ferry or train to travel around your vacation spot? Make sure these fees are included within your transportation budget as well.
Dine out sparingly while on vacation. The grocery store can be your best friend, even when you’re away from home. Meals out will take up a big chunk of your travel budget. Try to do your big spending at your list of top restaurants and save the rest of your money by grabbing food at the market. If you don’t have access to a kitchen where you are staying, you can still get creative and avoid overspending on every meal. For example, if you are going to the beach or the park, pack a picnic. You can also purchase nonperishable foods to keep in the hotel to make breakfast, lunches, snacks and quick dinners. For example, if you are a coffee drinker, buying coffee at the market and making it in your accommodations will save your budget. Also, if you are going to stay at a hostel or hotel, pick one that offers free breakfast and make sure you wake up in time to enjoy it.
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Allocate for unexpected expenses. Whether you splurged on something you couldn’t resist or ended up unexpectedly spraining your ankle while hiking up to see the Hollywood sign in Los Angeles, life still happens while you’re on vacation. Instead of paying for it later, make sure to plan ahead. Preparing financially for these moments can help you avoid putting items on your credit card and paying off the interest later.
Make your credit card work for you. Use a credit card with travel rewards to help save for travel and earn perks. The only smart way to use a credit card for this is if you’re able to pay off the monthly bills. Earning travel points is considered a type of travel currency. You can figure out hacks to help cut down on upfront costs, pay for activities while on vacation and ultimately spend less. Additionally, if you’re thinking about getting a new credit card, applying for a new one before vacation is a good way to take advantage of upfront rewards. Many credit cards offer rewards, such as cash back or airline miles, and some offer introductory perks for new cardholders, such as lower interest rates. That way, you can earn credit toward your next vacation when you use your card to pay.
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7 Strategies to Financially Prepare for Your Fall Vacation originally appeared on usnews.com
