Planning a vacation can be extremely exciting; studies have even shown that preparing for the trip can actually make people happier than the vacation itself!1 Below are some common ways that you can smartly prepare for your next getaway:
- Start with a budget: Creating and utilizing a budget can help establish spending patterns, reveal inefficiencies, track progress towards goals, expose excess cash flow, and uncover opportunities for savings. Usually, budgets should not exceed a years time and should be calculated on a monthly basis. When putting together the budget, make sure to keep it simple; if there is too much detail, you risk making it too difficult to implement and monitor.
- Consider a dedicated account: Many credit unions offer a Vacation Club-type account, but if that is not an option, a new bank account will work just as well. Treat this account as separate from your normal checking or savings accounts and, unless necessary, do not use these monies to pay bills or make non-vacation-related purchases.
- Set up a systematic savings plan: Depending on cash flow, a systematic payroll deduction or direct deposit arrangement may be easiest in terms of consistently funding your vacation account.
- Reduce extraneous spending” The next time you find yourself about to make an impulsive purchase, consider saving that money instead. Studies have shown that experiences make people happier than material items2; essentially, while the happiness from purchases is fleeting, experiences will stay with you. In addition, consider reducing the amount of times you dine out, so you can afford to enjoy nice meals on your vacation.
- Use your tax refund: If you have taken care of your financial priorities (increasing your emergency reserve, paying down debts, retirement savings, college funding, etc.) and still have money left over, use it to pad your vacation fund.
- Sell your stuff: Do you have collectibles that are collecting dust? Appliances that are taking up space? Consider holding a good old-fashioned yard sale. If you would like to expand your reach and do not need or want to put everything up for sale at once, sites like eBay and Amazon allow you to market each item to a much wider audience.
- Use a credit card with benefits: If you have a history of good credit and plan to take frequent vacations, it may make sense to apply for a credit card specifically designed to offer travel rewards. Benefits will vary by card, but rewards often come in the form of flight points, hotel discounts, statement credit, or cash back. It is important to research different options to see which credit cards best fit your particular spending habits and travel objectives. As always, when using a credit card, make sure that you are able to pay off the balance each month.
- Research deals before booking: Bundling flights, hotels, and/or a rental car can often result in a sizable discount if done through the same company. Many resorts also offer all-inclusive packages. In addition, sites like Kayak.com and Hotels.com offer membership rewards, flash sales, discounted flights to pre-selected destinations, etc. If you travel to the same places frequently, consider a membership card as oftentimes, these can come with significant benefits.
Whether you are a frequent traveler or just looking to get away for a long weekend, you may wish to consider having a MASTERPLAN done first. This financial plan will take a comprehensive look at your financial situation and help uncover potential sources of income to help you fund your next adventure, while making sure you stay on track to meet your other financial goals. Please contact Hefren-Tillotson for further details.
1 Applied Research in Quality of Life; March 2010, Volume 5, Issue 1, pp 3547
2 Anticipatory Consumption of Experiential and Material Purchases; October 2014, Psychological Science, Volume 25