By Claudia Mollerup-Madsen
Summer is here, and you may be thinking of taking a summer vacation. According to a recent survey, 74 percent of Americans say they have gone into debt to pay for a summer vacation. Whether you are planning to visit the beach this summer, a national park, or something in between, now is the time to make smart financial choices to help you prepare for your vacation. While many people are willing to prioritize travel over their savings, you do not have to sacrifice smart financial choices for a fulfilling vacation.
Set a budget
American households expect to spend about $1,200 per person on summer vacations. Ensure you are truly planning ahead of time. Decide on your location and set the budget. A good rule of thumb is to not spend more than 30 percent of your income on “wants.” Use this percentage when figuring out how much of your income you can spend on your vacation. Factor in hotel, airfare, gas, meals, entertainment, equipment, and new clothing. Once you determine how much your vacation will cost and what you can afford to spend, assemble a budget.
Now that you are aware of how much money you need to have before you go on vacation, set your goal for saving. By saving beforehand, you may avoid going into debt. Consider opening a separate bank account for your vacation spending. You do not want to dip into your savings or emergency fund for a vacation. Therefore, by setting up a separate account, you will not be as tempted to spend money appropriated to other areas. You can also set up direct deposit to the vacation account to make saving even more manageable.
To avoid being the average American who will go into debt to the tune of over $1,000, curtail your spending and put that money toward your vacation account. When grocery shopping, use coupons and cut back on treats. Limit eating out now and save that money for fun local food on your trip. Put your entertainment funds into your trip account. Look for other ways to cut back your spending and save even more. For example, look for a cheaper web streaming instead of more expensive cable packages, or ride share to the office to save on gas. Deposit the amount you are saving into your vacation fund.
Look for the best bargain
When you are booking your travel, looking for the best deals goes without saying, but have you considered traveling to your destination in the offseason? You can save considerably by going during the down period, and as a bonus there may be less crowds. You may also want to consider an all-inclusive resort.
Watch for airline sales and use any credit card points or frequent flier miles you may have available. When booking, remember that online sites can provide some good deals, but you may find a better deal by directly calling the airline or hotel.
Being smart about your vacation spending may make all the difference in enjoying your leisure time away and not being stressed about your finances. By planning ahead, saving accordingly, shopping around for deals, and staying within your budget, you will enjoy your vacation more earnestly.
Claudia Mollerup-Madsen is Vice President and Financial Advisor with the Wealth Management Division of Morgan Stanley in Houston.