Articles, Budgeting

8 Steps to Budget for a Vacation

Written By: Chris Panteli
Reviewed by: Mike Reyes
Last Updated October 3, 2023

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Budget for a Vacation

Thinking about booking a vacation this year? If you’re dreaming of sunbathing on a sandy beach but you’re just not sure if you can afford a holiday, this post is for you. 

Many people think of vacations as an out-of-reach luxury, but with some careful planning and our eight travel tips, you can budget for a vacation in June 2024, and get the time away you’ve been dreaming about.  

In this article, we’ll show you how to plan a vacation on a budget and why it’s important to stick to a plan when going on a trip. 

The importance of budgeting for a vacation

The importance of budgeting for a vacation

Because vacations are a luxury, it’s easy to forgo the budget and splurge. But there are four important reasons you should always budget for a vacation:

Saves countless hours

Without a budget for your trip, you’ll spend hours searching through thousands of holidays that you simply can’t afford. With a sensible travel budget, you can quickly narrow down your search and find the perfect holiday much faster. 

No post-trip stress

You’ll already be a little sad when you come home from a vacation; you don’t want to add the stress of working out how much you overspent on your travels. Sticking to a budget means you won’t be worried about paying off credit card debt after your trip ends.  

You can travel more

The better you are at vacation budgeting, the more you’ll have to dedicate toward travel. This could mean longer holidays, more trips, or simply saving up for that dream vacation you’ve always wanted to go on. 

Teach your kids good money habits

If you’re going on a vacation as a family, it’s a great opportunity to teach your kids some good budgeting skills. Get them involved in the saving process and show them how you save every month to make their vacations possible. This sets them up with good money management skills and will help them appreciate their holiday that much more. 

How to budget for a vacation

How to budget for a vacation

Whether you’re planning on going to New York or New Zealand, here is how to budget for a trip. 

  1. Set a realistic vacation budget 

Before you do anything else, figure out how much you can spend on a trip. How much money can you put aside for a vacation each month without putting strain on your normal budget? How long do you have to save before you plan on going?

By starting with a budget, you’ll be able to narrow down your search and avoid talking yourself into expensive vacations you can’t afford. 

  1. Set up a separate savings account

Set up a separate savings account dedicated to vacations once you know how much you need to save each week or month. This will keep your vacation money separate from your living expenses and motivate you to save. 

  1. Find the perfect vacation

Now comes the fun part – finding the vacation you want to take. With a budget, you can narrow down your search criteria, making the process faster. You’ll also avoid the disappointment of finding packages you can’t afford. 

  1. Factor in hidden travel expenses

Many people only budget for the cost of the airline ticket and hotel room, but other expenses need to be factored in. 

When you’ve found a holiday that works for your budget, don’t forget about the hidden travel expenses that boost the price:

  • Food costs
  • Additional tax and tourist tax
  • Travel insurance
  • Airport transfers and other travel costs
  • Mobile phone roaming charges
  • Extra baggage fees
  • Temporary driver’s license for a rental car
  • Tipping

Each travel expense should be in your total budget, even if it’s just an estimate to start with. 

  1. Don’t forget about currency exchange fees

Exchange rates vary depending on the bank or store, so do your research to get the very best rate. If you plan on using ATMs when you arrive, these usually charge a withdrawal fee of between $2 and $10 per transaction, so this will need to be budgeted for. 

  1. Make an itinerary

After you’ve found your ideal vacation, it’s time to draw up an itinerary. Lets say you want to take a trip during the December holidays. Once you’re in holiday mode, it’s easy to overspend on excursions, expensive restaurants, and gifts, but having a planned itinerary can reign in this overspending.  

Do some research on the area and plan out your vacation or road trip. By planning your excursions, meals, and other activities, you know how much money you’ll need in advance, and it’ll be easier to avoid impulse purchases while you’re away. 

  1. Take the 52-week money challenge

If you’re struggling to save enough money to reach your vacation target, why not try out the 52-week money challenge? With some relatively simple tips, you can save up to $5000 in one year. 

The challenge involves cutting back on expenses, reducing fees, and other clever tricks to save money you might be wasting. Saving can be tough, but when you have a vacation motivating you, it’s much easier to cut back on those unnecessary expenses. 

  1. Don’t forget to enjoy yourself

It’s important to be sensible when budgeting for a holiday, but don’t forget to enjoy the process. A vacation should be a relaxing retreat and a time to destress. If you can, factor a new outfit into your budget to treat yourself and make the trip a little more special, or simply take some time to look up photos of the hotel to remind yourself what all the planning is for. 

Final Thoughts

Being strict with your budget is the best way to manage your money when it comes to vacations. Treat your vacation like any other large purchase: make a plan, save every month, and stick to your budget. 

It might seem difficult to cut back on expenses and stick to budget travel plans, but you’ll be thankful you did when you’re enjoying that relaxing vacation you’ve been dreaming about. 

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