Even the best at personal finance lose control of expenses on vacations. There is a reason that the travel industry is so big – people tend to get the attitude of “It’s o.k., I’m on vacation” and forget about prices. Suddenly paying eight dollars for a beer that comes $10 per six-pack is just fine. Paying $20 to park at your own hotel is just fine. Even shelling out $50 to check a bag is tolerable – after all, “I’m on vacation.”
These expenses add up quickly, however. Since most people are broke (and no matter how much you earn, if you have credit card debt and less than $10,000 in the bank, you are broke), a lot of this cost goes on credit cards to be paid off over 20 years. Do a few of these vacations and suddenly what was a tiny credit card payment becomes a substantial part of your monthly outgo. Once the hole gets to a sufficient size, it becomes difficult to simply tread water, let alone swim your way out.
Personally, vacations can be very stressful for me. The reason is I usually end up in the roll of gatekeeper for my family’s expenses. “Can the kids have money for a souvenir?” “She really wants that stuffed zebra.” “Can we go on this helicopter tour?” The reason I hate the role isn’t so much the expense as the feeling of being out of control. Of not knowing how much we are spending when we keep doing all sorts of things I hadn’t planned on doing. I hate to worry about expenses, but then again I also don’t want to end up spending twice as much as I had planned.
The secret to avoiding this worry is plan things out ahead of time, including planning for the unexpected. This means creating a vacation budget that includes some flexibility. Some of the key steps are as follows:
1. Plan a budget for the costs you know will occur. You should have a good idea of hotel expenses before you go. Don’t forget to add about 20% for taxes. You should also know the cost of the rental car, airfare, and attractions you know you’ll visit. Make sure that these costs are well within your budget for the vacation (maybe within 60-75% of your total budget, unless food is included). Otherwise, scale back the vacation a bit or work to save up more before the trip. It is a lot more fun if your vacation fits within your budget than it is to scrimp and save all along the way. Plan to pay for these expenses via debit card since they really can’t be changed once you’ve booked the trip. Also, prepay as many of these as you can so that you won’t have a shock waiting for you when you get home.
2. Budget for planned, but variable expenses. Food is the primary item in this category, but things like parking, public transportation, and amenities fit in as well. You don’t quite know what you’ll spend at each meal, but you have a general idea. I usually find that we spend about $100 per day for our family of four for meals when on vacation, although as our kids are getting older that may go up to $150 per day. We normally eat it casual but sit-down restaurants. Expenses would be more if your family wanted to go to white table-cloth restaurants every night or less if you planned on getting pizza or counter service for several of the meals. (Note, most hotels, even fancy ones, have Domino’s pizza right on the card key. That could be a $15 dinner some night when you or your wallet are tired.)
Plan these expenses, leaving maybe a 20% contingency in case food costs more than you think. Once again, scale your vacation back if costs are getting way over your budget, or save up more to increase your budget. Another trick is to find a hotel with a refrigerator and microwave. Pick up some paper plates and plasticware and you can have left-overs from dinners for lunches, which will help both your wallet and your waistline. This money ideally would be in cash since it is something you can vary somewhat and people spend less when they use cash, plus using cash is a good way to keep track of how much you are spending. If this is more cash than you choose to carry, maybe plan on hitting an ATM at some points on your trip.
3. Plan for the unexpected expenses.
There will always be things you didn’t expect along the way. Create a budget for this. For example, maybe have an extra $100 every day or every couple of days to do something unplanned. This should always be in cash. So long as you still have cash, you can do these little extras without worrying about blowing your budget.
4. Make sure you and your spouse agree. Before the trip ever starts, talk to your spouse about plans and expenses. The budget should be set ahead of time, not when everyone wants to go on an unplanned harbor cruise that would blow the budget. Make sure that the amount you have budgeted for meals and extras is reasonable to both parties and that there is an agreement. This should be two equal partners making and sticking to a plan, rather than one spouse being the gate-keeper.
Once again, if the daily budget seems tight, consider cutting days off or choosing less expensive options for hotels and meals. It is not fun when things feel too tight. Also consider swapping expensive theme parks for free attractions like visits to parks and trips to the trails or beach to reduce costs if needed. Maybe look at picking up some bagels and cereal for breakfast to save $30 per day.
With a little advanced planning to make sure your expenses are in line with your budget, scaling your vacation appropriately, and agreement with your family, vacations can be both less stressful and more fun, even for the penny-pincher.
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