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A Vacation Budget Can Keep Spending in Line

May 27, 2015
Managing Money, Personal Finance
A Vacation Budget Can Keep Spending in Line Story
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Never underestimate the power of a good vacation — to help you relax, bond with your loved ones and quickly deplete your short-term savings.

With a little extra planning, you can enjoy your vacation and keep some cash in your savings account.

Set a vacation budget

A budget can help keep overspending in check. It can help you decide on impulse purchases as they arise. And when you might otherwise lose track of credit card spending, a budget helps you remember what you can actually afford.

Save for your trip

As Chicago financial planner Barb White says, “How much you can save drives the vacation.”

If you have time to gather funds, consider opening a separate savings account for your vacation allowance. Setting up a recurring automatic funds transfer from your checking account to your vacation account is a convenient way to ensure you hit your savings target.

If your trip is right around the corner, and you must put some expenses on a credit card, be sure you can pay off your balance before you’re charged interest.

Categories to include

Once you know how much you can spend on a vacation, divvy up those funds into spending buckets such as:

  • Travel to your destination
  • Transportation while you’re there
  • Accommodations
  • Food and drink
  • Must-do activities (for example, the Broadway show that made you decide to visit New York in the first place)
  • Discretionary spending (for unexpected expenses and impulse purchases)

Research and estimate the amount of money you’ll need for each spending category, given the length of your trip and your chosen destination. Add up the costs and check if the total falls within your budget. If it exceeds what you can afford, adjust your spending according to what’s most important to you.

For example, if you’re traveling alone, you might be willing to spend less on accommodations by staying in a hostel rather than a hotel. Or, if you’ll be with friends, driving instead of flying can free up a significant amount of funds you can pool to spend on more exciting activities.

Protect your future

You should also make sure you’ll still have enough rainy-day savings when the vacation’s all paid off. White asks her clients: “Are they going to put a washing machine on a credit card because they’re taking this vacation?” Your vacation shouldn’t put you at risk for financial trouble or disrupt your long-term savings goals.

How vacation overspending happens

It might also be helpful to recognize why you might overspend in the first place. Being on vacation can make it easier to succumb to the following:

Impulse buys

A barrage of small impulse-spending opportunities, such as room service, souvenirs and an hour at a slot machine, make it all too tempting to spend. “People don’t realize how it all adds up,” White says. “It’s like doing a home improvement project.”


We tend to underestimate the cost and frequency of our purchases, especially if they’re not budgeted, according to a 2012 study by marketing researchers. This can happen on vacation, too.

Overuse of credit cards 

Credit cards can be a valuable part of a financial plan. However, it can be easier to overspend with them. Rewards can make it tempting to justify credit card use, but it’s important to monitor purchases to prevent overspending.

It can take some time to plan your vacation responsibly, and effort to track your spending against your budget. But it’s the best way to be sure that your trip won’t cost you more than you can afford.

Devan Goldstein is a staff writer covering personal finance for NerdWallet. Follow him on Twitter and on Google+.

Image via iStock.