Wasting money is easy to do, but sometimes we waste money and we don’t even realize it. My last post about this topic has to do with taking vacations. Vacations are a very personal thing, and in today’s crazy 24/7 world, they are increasingly important for your personal well-being. However, they are probably the easiest way to waste money as well, and paying for a vacation can easily turn into a source of stress, ultimately defeating the purpose of taking the vacation! Her are some ways you might be wasting money on vacations.
1) Not budgeting for your vacation: Many people plan out their vacations to the last detail, but forget the most important part. How much will it cost and how will you pay for it? Setting a budget won’t take long, just create a spreadsheet or write it down on a piece of paper and figure out what it will cost you. Here are several line items that should be included:
- Travel costs: Depending on what type of trip you are taking, this could be one of your biggest line items. Include airline tickets, airport parking, fuel costs, rental car costs, train or bus tickets, and anything else that may be included in physically moving you from your home to your travel destination.
- Housing costs: If you travel somewhere for vacation, you are going to have stay somewhere. Depending on where you go, this can be a very large part of your budget. Luckily, it is also the easiest to plan for, as most places are booked in advance. Be sure to include all relevant taxes and resort fees when they are applicable. Also, make sure that if you plan on being out of your hotel for the majority of your trip, you may not need to stay at the Ritz. Look at Airbnb.com or VRBO.com for deals on houses on condos that may be a better fit for your vacation.
- Food costs: Depending on the size of your family and the length of your stay, this can easily be your biggest expense. It is also the hardest to budget for, as you never really know how much a restaurant will cost you. To be safe, add in a 20% to 30% safety factor here. For a family of four, I usually budget $100 per day towards food. When we travel, we rent houses or condos where we can cook meals with food purchased at the grocery store, which is much cheaper than eating out for every meal. This budget could easily double if we planned on dining out or eating at a resort for three meals per day.
- Entertainment and activities: This is probably the largest variable in travel planning. If you like to travel to a beach destination, this one might be a small line item for renting beach chairs or horseback riding. However, if you are going to Disney, you may need to consider a second mortgage to pay for your park tickets. Based on the type of travel you like to do, come up with an estimate of daily activities and add this line item. If you find you are over your budget for your vacation, this is the area that you can really adjust. For instance, taking a day off of the theme parks and going to a national park can provide a great experience for your family that will cost you a fraction of what Mickey will charge you.
- Miscellaneous charges: When you are finished, make sure to include a line item for miscellaneous items that are bound to come up during your stay. Someone will probably forget their toothbrush or underwear, or your wife is bound to spot a purse that she can’t live without. This is where those items will fall
2) Once you have gone through the process of budgeting for your vacation, the easy part is done. The hard part is sticking to that budget. Sticking to a budget day to day is hard, but the carefree attitude of vacation makes it even harder. Try to do a mid-vacation check up and see where you are versus your budget. If you find out you are over, try to adjust the rest of your vacation accordingly.
3) Financing a vacation on credit cards: There are only a few things in life that worth financing, and vacations are absolutely not one of them (especially on a credit card). First of all, you are adding huge interest charges to your total vacation cost, which makes no sense. Why pay for something that isn’t giving you anything in return? Your annual budget should have a line item in it for vacation savings, and it should be saved in advance of the vacation.
4) Not booking in advance: As a general rule, the longer you wait to book that vacation, the more it will cost you. If you know you want to take a summer vacation, start thinking about it in January. Check prices and availability over your potential travel time, and if you find a great deal, book it in advance. Not only can this save you money, but it allows you to adjust your travel plans if you find that prices are too high the week you planned on travelling.
5) Having firm travel dates: This one is tough to get around, and we understand that. However, so do the resorts, airlines, rental car companies, and tour operators. It is simple economics. When demand is high, so are prices. Everyone has kids in school, and everyone gets approximately the same times off with them. Therefore, school breaks are going to be peak times to go on vacation, and everything will cost you more. Instead of leaving the Friday evening or Saturday morning that the kids get off, look at the prices on Sunday morning. The airlines may have flights for a substantial discount at off-peak hours. On your return trip, look at flying back Saturday or Monday instead of Sunday to avoid peak travel times.
6) Flying instead of driving: I know that driving with a family can be an interesting experience, but economically, it usually makes more financial sense than flying. Airline tickets are expensive, and earplugs are cheap.
7) This one is kind of a catch-all for everything that I missed, but there are some other ones that you might want to think about. If you are travelling internationally, use cash or get a credit card that doesn’t charge travel fees. All-inclusive vacation packages may seem like a great deal, but all of these packages are designed to make someone else a profit. Compare pricing to buying the parts individually, and consider that before you purchase just because it is easier. Buying a lot of souvenir junk can run up your vacation bill substantially. Ask yourself how much the kids will actually play with the 4th souvenir item they beg you to buy for them, and decide if it is worth it. Remember, the vacation is about the experience, not the stuff you bring back.