How to Save Money for a Vacation

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Take the pain out of paying for your vacation by saving for it ahead of time. These tips will save you from a post-vacation financial hangover.

Like waking to a pounding head after a night of revelry, few things spoil the afterglow of a great vacation faster than the arrival of a whopping post-vacation credit card bill. Did we really need a room with an ocean view? Can we sell that one-of-a-kind Austrian cuckoo clock on eBay? Maybe we should have skipped Paris and visited the in-laws in Kansas instead.

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Fortunately, there is a cure for the financial hangover that frequently follows a vacation, and it doesn’t entail drinking pickle juice or staying in hostels. The secret is simple: Save for the trip—every last penny of it—before you pack your bags.

By doing so, you’ll not only spare yourself the guilt of taking a vacation you couldn’t quite afford, but you’re likely to find that when all is said and done, the trip is far more gratifying. Set a goal, trim the pork from your personal spending, make saving part of your daily routine, and before you know it, you’ve paid for that trip to Paris. Our apologies to the in-laws.

Ways To Save Money For Your Next Trip

Step One: It Starts with a Goal

The first step toward any kind of saving is to define your objective, whether it’s surfing in Costa Rica this spring or driving cross-country next summer. If you’re flying solo, write down your goal or talk it up to your friends. If you’re married, discuss your plan with your spouse. If you have kids, get them on board. Saving in and of itself is generally not very satisfying, says Dan Ariely, the James B. Duke Professor of Behavioral Economics at Duke University. “But the moment we can put a tag, a goal, something concrete onto savings, we can visualize it, we can understand it, and therefore it becomes more rewarding.”

If you already have a trip in mind, come up with a detailed budget that includes everything from airfare and accommodations to airport parking and dog-sitting. “People often overlook the cost of getting to the airport or being away from their home,” says Justin Krane, a certified financial planner in Los Angeles.

Next, take that dollar estimate and divide it by the number of weeks to your departure. That’s how much you should aim to save per week. Why weekly? Saving $320 a month might sound daunting. But saving $80 a week may just be a matter of brown-bagging your family’s lunches or making other small adjustments to your spending.

‘Find’ the Money

Granted, financing a vacation isn’t just a matter of combing the couch cushions for spare change. Still, you’d be surprised by how much waste is hiding in your personal budget.

Look at your regular monthly expenses to see where you can nip and tuck, says Krane. Take your phone bill. If you have a beefy cell plan and a traditional landline, consider switching your landline to voice-over-Internet protocol or cutting the cord altogether. Depending on what you pay now, the movie could easily shave $50 off your monthly talk tab. Ditto if you consolidate your home and auto insurance, or shop the policies around every few years. While you’re at it, look into refinancing car loans, student loans, and (if you can) your home loan. Knocking down your rates alone may be enough to finance a vacation, the end of the story.

The lines between essential and non-essential items are often blurry, but there is typically ample opportunity to save on discretionary expenses. The promise of a great vacation is certainly worth rethinking that premium cable package, bypassing the gourmet aisle at the grocery store, or trading in your rarely used gym membership for a pair of running shoes. Just be careful to pick and choose where you save. Deprive yourself of too many daily pleasures and your spending diet will likely result in a binge. Instead, think in terms of which expenses truly improve your quality of life, says Duke University’s Ariely. “Let’s say you have a $100 coffee habit and a $100 cable bill,” he says. “The question is: ‘Which one is more valuable to you?’ ”

While saving money is the first place to start, Krane points out another obvious but often overlooked strategy for financing a vacation: earning money. Depending on your line of work, that could mean picking up extra shifts here and there, freelancing on weekends, or, in the case of hairstylist Matt Jameson, trading a year’s worth of hair-dos for a family of five for one week’s use of their beach house on the Oregon Coast. “It’s a win-win for both of us,” says Jameson.

Devise a System

Once you’ve set a goal and cleared space in your budget for building a vacation fund, you’ll want to determine the best mechanism to save. The go-to strategy preached by most financial planners is to set up a separate savings account linked to your checking account and make automatic deposits for the amount you’ve earmarked. Resist the urge to raid your account by naming it in honor of your vacation (i.e., “Italy Fund”) or simply labeling it “This is a Vacation.”

That’s not to say automatic transfers are the only way to save. For some people—particularly those who’ve recruited their kids to chip in—it helps to see the dollars and cents pile up. When Leon LaBrecque, a certified financial planner in Troy, Michigan, and his wife decided to save up for a vacation home many years ago, they took a picture of a cottage they liked, taped it to a large jar, and “bought the jar a Starbucks” once, sometimes twice a day. Within four years, they’d treated the jar to enough cups of coffee to put a down payment on a lake house. “For some people, it helps to have that visual,” says LaBrecque. If coffee isn’t your thing, pick another vice, such as weekday lunches out. Or simply vow to deposit all your coins, or singles, or five-dollar bills in the jar. “It adds up faster than people realize,” LaBrecque adds.

When Elizabeth Justema, a marketing director for an artisan cheesemaker, decided to start saving for a 40th birthday trip of a lifetime next August, she got her boss onboard. Starting in September, he began setting aside $500 a month from her paycheck on her behalf. “I didn’t really notice the smaller paycheck,” says Justema, who went from working as a contractor to a salaried employee around that time. And yet she’s already socked away more than $2,000.

If you’d rather not get your boss involved, prepaying for certain items, such as the hotel or rental house, is a great way to put your savings out of arm’s reach. “Just make sure you can get most of it refunded if you need to, and don’t put it on a credit card unless you actually have the funds,” notes Krane. Other ways to prepay include buying prepaid Visa or MasterCard debit cards or paying more than your credit card balance to build a little cushion.

Of course, saving for a vacation doesn’t have to be done in dollars. If you’re smart about using a frequent-flier credit card, you can stockpile quite a few miles over the course of a year. Investment manager Amanda Atwill puts all of her expenses on her frequent-flier credit card and pays it off religiously at the end of each month. While the card does carry a $30 annual fee, it’s well worth the chance to fly somewhere gratis at least once a year.

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