How to Prepare Financially for a Summer Vacation
Ah, summer. Sunshine, surfing, hiking, hammocking. It’s a great time to relax and recharge. But how can you take a vacation without breaking the bank? Vacations are expensive, and if you’ve been working hard to take control of your finances, it can be easy to slip back into old habits. Taking a summer vacation is a good thing, as long as you are financially prepared for it. Here are five tips for preparing financially for a summer vacation.
Tip #1: Save Up
The most important way to be financially prepared for a vacation is to save up ahead of time. Don’t be tempted to put major trip expenses on a credit card with the expectation that you’ll pay it off later. By all means, use a credit card for your vacation. Just make sure you have the funds ready to pay off all the vacation expenses before that month’s credit card statement comes due. Debt from vacations is extremely difficult to pay off and contributes to what we call “the debt disease”. It will also make you dread the end of your vacation when you have to go back to work to earn money you’ve already spent. Instead, save up money before you go on a trip. That way, you can spend your vacation money knowing you’ve already earned it.
Tip #2: Get Out of Debt
In the same vein, getting out of debt will give you the freedom to take more vacations. By getting out of debt, you free up cash that you could put toward that trip to Europe or the beach vacation you’ve been longing for. Credit card debt, auto loans, mortgages, and student loans can take a big chunk out of your income. And they usually come with a high price. Once you get out of debt, you’ll save money on interest costs and have more financial freedom to spend money on things like summer vacations. Just be sure not to get into further debt by going on vacation. (See tip #1.)
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Tip #3: Stick to Your Budget
Create a budget and stick to it all throughout the year. Include a vacation savings plan within your budget so you have the funds ready when summer comes along. Work on creating financial habits to keep you within your budget throughout the year. Then stay within your allotted vacation budget while you’re on the trip. You don’t have to obsess over your budget (in fact, you shouldn’t), but create habits that will carry over while you’re on vacation. Even when you splurge a little, you still maintain control and don’t get carried away with your spending.
Tip #4: Automate Your Savings and Bill Payments
Set up automatic transfers to a savings account or an account dedicated to a vacation fund. Every time you get paid, a designated portion of the money will transfer to the account. If you use a debit card for your daily purchases, consider a “spare change” program if your bank offers one. These programs round up each purchase to the nearest dollar and place the change into a separate account. The concept is similar to putting spare change into a jar at the end of each day.
Similarly, you can automate your bill payments. This ensures you won’t incur late fees or interest charges, and it can give you peace of mind when you take a longer vacation. If you have systems in place, you won’t have to worry about missing a payment while you’re away.
Tip #5: Take Advantage of Rewards
If you travel often, look for travel perks in your everyday purchases. Take advantage of any airline reward programs offered by your credit card. See if your bank offers points that can be converted into travel rewards. Look for loyalty discounts at gas stations to save money on road trips and check if you qualify for discounts at national and state parks. Consider making your primary credit card an airline rewards card so you build travel points with every purchase. Be sure the card has no foreign transaction fees so you don’t get charged for every purchase made abroad.
A summer vacation is good for the body and mind, and it can be good for your wallet if you’re prepared. These travel tips can be used for vacations of any budget, whether it’s camping in a nearby forest or flying first-class to an all-inclusive resort. The important thing is to make sure the trip fits in your budget and that you’re financially prepared for the vacation before you go.
Find out how 101 Financial’s Workplace Wellness program helps individuals, couples, and families prepare financially for their dream vacations.