Tips to Save for a Vacation

How To Link Aadhar Card With Kotak Bank

Get your free Credit report that cost  Rs 1200 for FREE

1. Build your Credit Score

2. Reduce your Current Borrowing / EMI Costs

Imagine yourself strolling on the Hawaiian beaches, smelling the salty sea breeze and feeling the sand under your feet as you watch the sun slowly pop out of the sea... or watching the calm and serene sun slowly vanish behind the Swiss Alps... or blissfully sitting atop the grand Eiffel Tower with your loved one, watching the city of love suddenly light up at sundown.

Aren't these ideal vacation moments? I'd do anything to experience these! However, vacations like these don't come cheap. Think about your dream destination. Don't you want them to turn into reality? Well, you should start saving for it! Let me tell you how...

Figure Out What and How Much You Need

Before you start planning on how to save for a vacation, you must get a rough idea of an approximate amount that you plan on spending. An exact calculation isn't practical at this point, but you will surely be able to research your destination and come up with an average estimate of expenses. You will know how much you are looking at, and can accordingly strategize your saving mechanism.

Each person has different ways of traveling. Some prefer road trips while some would prefer flying to the destination to avoid wasting time. Some might want to travel luxuriously and some might prefer a cheaper trip. You need to determine how you wish to travel and check if your budget is feasible for it.

Accordingly, you might need to cut down some costs so that your trip expenses fit into your budget. Once you get the hang of your estimated expenses, you will know how much you need to save every month.

These are the primary expenses that you should consider:

  1. Accommodation

  2. Travel costs - including airline tickets and local transportation for sight-seeing

  3. Car rental costs at the destination

  4. Food expenses

  5. Entertainment

  6. Phone expenses, considering roaming charges

  7. Currency conversion charges

  8. Shopping for souvenirs

  9. Other purchases to suit the trip (for example, a seaside destination might require swimwear or snorkeling gear; a mountain destination might require hiking gear)

Set a Budget

First and foremost, you must learn to track your monthly expenses to figure out where your money goes. Once you succeed in understanding your spending pattern, you might also unravel ways to keep your inessential expenses under control. This is how you can afford to spend on trips.

Create a monthly budget so that you can put enough money into your vacation fund. If you aren't a pro at planning a budget, follow the simple 50-30-20 budget plan. Allocate around 50% of your total income (total income from all sources, after all the deductions) towards your necessities, 30% for your wants and the remaining 20% for savings and paying off debt.

Your vacation fund will come from this 'wants' category. If you don't follow the budget plan diligently, your dream vacation might remain just that - a dream.

Estimate Travel Costs

Now that you have started saving for your vacation, start planning for the dream trip. The trip expenses would be a great area to begin.  

There are several travel search engines such as Kayak, Travelocity, Expedia that can give you a rough idea of transportation and accommodation costs that you might be looking at. These are the larger expenses, and you must gather a fair idea of these when you start planning. Read up travelogues and trip reviews on your vacation destination.

Make a list of exciting activities to do and interesting places to see. Add up those estimated expenses. For example, if you are visiting London and wish to take the London Eye ride, you need to find out the ride fare as well as the transportation costs involved. If you are a foodie, you must read up on the local cuisine and figure out how much you would be spending on meals each day.

Tips to Save for a Vacation

If you are traveling overseas, you have a lot more to add to this list. There are visa charges, currency conversion costs as well as an exorbitant rate of international roaming facility on your cell phone. Add everything up and you will know how much you need for the trip. If you already have some prior savings, deduct the amount to get an estimate that you still need to save.

In case you have already decided your travel date, you would know exactly how long you have to save enough for the trip and subsequently calculate how much you need to save every month to reach your target. A vacation calculator could be handy and there are many available online.

Fit the Trip into Your Budget

Once you know how much more you need to save each month, compare the figure (let's call it 'monthly vacation savings') to the 30% of your monthly income that is set aside for your 'wants.' If your monthly vacation savings is less than the total allotment for your 'wants,' rest assured that you can make the trip happen.

If both of those figures are similar, you could still make it to your dream destination, provided that you are willing to sacrifice all your other 'wants' until the trip. This could require you to refrain from dining out with friends or even stop going to the movies. You could probably scrimp a bit if your trip is scheduled a month or two away.

But if you have to continue this way for a longer time, you will be at risk of feeling frustrated and overspending. In such a scenario, it is better to tweak your travel plans so that you avoid feeling deprived, depressed and over-burdened as you save for your trip.

However, if your monthly vacation savings is more than your 'wants' allowance, you might seriously have to consider rescheduling your trip or adjusting your vacation plans. You might have to delay your departure, reduce the duration of your trip or compromise on some other grounds.

You could free up some money by re-evaluating your monthly expenses. Do not touch the 20% allowance for savings, but you could make slight changes in your lifestyle to contribute a little more towards your vacation fund. You could look for a cheaper mobile connection or disconnect your cable connection for a few months to add a little more to your vacation fund.

You could also consider taking up a second job to increase your earnings. However, try not to take it too hard upon yourself. You need to stay cheerful and cherish each moment of your dream vacation.

If you are still falling short of funds, you could consider selling some old and unused items. We often discard old furniture, books, clothes, gadgets, etc. There are numerous ways of buying and selling used products. Look for things in your house that you hardly use and put them up on Olx or Quikr. You might make a few thousand bucks as you declutter your home. Put the money into your vacation fund.

Set Up a Vacation Account

You could deposit your savings for the trip into a dedicated vacation fund. It will give you a perspective of how much you have already saved and how much you still need. As you channelize some money from your monthly expenses and deposit in the vacation account, you will be motivated by the rising numbers. This could be a great idea as it will keep you off the temptation to use the money to buy something else.

You could also go back to your childhood days and get yourself a piggy bank. Whenever you use cash and have some leftover change in your pocket, you can just toss it into the piggy bank. If you are traveling with people, make everyone save changes to maximize savings. It sounds funny, but when you collect and combine these changes, you might have saved enough for a meal or an activity on the trip.

Get the Correct Means of Expenditure

Travel credit cards provide wonderful perks that can let you save thousands of rupees if you are able to find the perfect card to suit your purpose. You could get facilities like waived baggage fees, free airport lounge access, trip cancellation insurance, free flight tickets, discounted hotel bookings, cash back on purchases, etc.

There are plenty of travel credit cards available in the financial market. Research thoroughly and find out a card that suits you. You could save a lot for and on the trip using these cards.

If you are traveling abroad, you must find out your options for currency exchange. Don’t be naive enough to waste money on currency conversion. You should know that these services are provided by several financial institutions such as banks, credit card companies, airport kiosks and RBI authorized Money Changers or Foreign Exchange Houses.

Their conversion rates and service charges vary and the exchange rate changes within a fraction of a second. Identify the source that offers the cheapest deal and help yourself save more. Consider getting a forex travel card as well.

To Sum Up

Once you have planned a befitting budget for your trip, look for ways to keep yourself motivated. Set up a countdown calendar and cross out the days. Research all you can and discover bits and pieces of the destination.

Make sure that you monitor the balance in your trip fund account - as the balance increases, your heart will swell with pride and excitement.

Have a happy trip!


Get your invite to mymoneykarma

Credit Score powered by
Equifax Free Credit Score®