This is part of a new series – Your $, Your ?

Ask a question using the “Ask a question” link on the homepage and I will try to answer it according to “What would I do?” or “How would I handle that?”

Here’s the question I received via Fiscal Fitness’s Facebook page:

I was thinking a suggestion on how to fit vacations in the budget.  For example we will be in MI for 3 weeks in June.  How the heck do you plan/budget for a vacation?  We use vacation as an excuse to spend whatever.  I’m sure others do as well.  Summer is a great time for vacations.  So how do we (your viewers) do it?  How do we effectively/responsibly/comfortably fit vacations into our summer budget?

Great question and she’s absolutely right, most people use vacations as an excuse to spend whatever…I couldn’t have said it better myself!

You’ve just returned from vacation and you feel incredible. You’re relaxed and basking in the memories from the sites, people, and food you experienced. It’s a wonderful feeling. There’s a “glow” about you right?

Then you realize you have to start paying for all of it. How much did you spend? Any idea? Once you look at your credit card bill you think, “Woah, did I really spend that much?” We’ve all been there!

Believe it or not, spending whatever you want with little regard for a budget will only make you happy while you’re actually on vacation. It’s a short-lived happiness and the gratification you feel is only temporary. As soon as you get back, you may experience some serious buyer’s remorse and that’s no way to come back from a vacation!

(Let me add here really quickly that I’m assuming you are in a position to take a vacation. If you are going on vacation yet will fall behind in your bills as a result, you probably shouldn’t be taking one in the first place. In this blog post, I’m assuming you have money above what you owe in bills and are cash flowing your trip.)

Even if you are able (in a position) to spend whatever you want while on vacation, it’s still important to have a budget. You will face more temptations while traveling than any other time. And because you’re in “vacation-mode” you’re much more likely to fall for those temptations. Just because you have the money, doesn’t mean you want to waste it, right?

So you’re going on vacation, here’s what you do.

1. Sit down with a spouse (if you’re going together). It’s both of your vacation so it’s important that both your needs are met with the trip’s budget.

2. Write down the necessary categories that apply to your trip. Food, hotel, parking/tolls, gas, car rental, train tickets, postcards and postage, eating out, etc. We’ll get to “entertainment/activities” later. You can google “travel budget worksheet” to see tons of ideas and examples of categories you may not think of otherwise!

3. Your goal is to set an amount for each of the necessary categories but don’t just guess. Look at your itinerary for your trip. What activities do you have planned? How many meals will you be eating out? Are there specific restaurants you know you want to check out because if so, you can probably find their menu online and approximate the cost of your meal. If you know where you’re staying, you should know how much it will cost (don’t forget to plan for hotel fees, taxes, etc). If you know where you’ll be traveling, you can also estimate how much gas you’ll need. AAA has an awesome fuel estimator where you type in the make & model of your car and where you’re going.  Write down the amounts you want to spend next to each category! (You’ve just created a budget- see, that was easy right? The hard part is in sticking to it!)  Now, this is a vacation after all so allow yourself some wiggle room (if your finances permit). Don’t forget to add a little extra for a glass of wine with dinner, a meal at a fancy restaurant, etc.  Be realistic.

4. Hotel, transportation, and food are necessary items when you’re on vacation. Total up these expenses. What do you think? Is it a lot? Do you GASP! when you see the total or is it not as bad as you were expecting? Once you determine how much you will need for essentials, you can move on to the entertainment/activities/excursions part of your budget. Before you move past this step, determine how much you’d like to spend on the “extras” part of your trip. $200? $500? $1,000? It depends on where you’re going, for how long, and what things you like to do. It also depends on your personal circumstances and what you can afford. What seems reasonable based on these factors? WRITE DOWN THIS NUMBER!

5. Now that you know how much you have to spend, make a list of all the activities you’d like to do while you’re traveling. Rank them in order of which activities are most important to you. When my husband and I went to Cancun, we knew we wanted to go scuba diving. It was our #1.  After that, we knew we wanted to check out Playa del Carmen so that was our #2. You get the idea.

6. Research how much each of these activities will cost. As I said, we knew we wanted to visit Playa del Carmen which meant bus fare to/from, a meal while we were there, probably some afternoon snacks, a souvenier, etc. Our estimate for how much that day trip would cost was very easy to determine. Your total amount from #4 determines how many of your activities you’ll be able to do. But do them according to your priority and you won’t feel like you’re missing out on anything!

7. Before you leave for you trip, make envelopes labeled with each of your categories and the amount you have budgeted. Either before you leave or when you arrive at your destination (if another country), fund the envelopes with cash (for any that you won’t be using credit card for like your hotel). When we went to Mexico, we “funded” our envelopes once we arrived so we were using their currency. Most hotel rooms have a safe which is where we kept everything. The day we went to Playa del Carmen, we already knew exactly how much we planned to spend so that’s how much we took with us that day. (In the question asked, you could even separate the budget or envelopes by Week 1, Week 2, Week 3 and fund just before the week begins- easier to keep track of it all!)

8. Do a quick “budget review” every few days during your trip. This doesn’t have to be a long, drawn-out ordeal but it should involve both you and your spouse. “We’ve got $X remaining for gas which should be just fine.” or “We spend a lot on dinner last night but that was planned.” or “Tomorrow we’re doing X,Y,Z and we’re planning to spend $X.” Super quick. This small move keeps you in check while on vacation.

9. This could be a whole separate post entirely (and probably will be) but you should try to save monthly for travel/vacations. Just because you take more vacations in the summer, doesn’t mean you can’t begin saving in January and spread the expense over the year.

Going on a vacation with a budget does not mean you can’t enjoy yourself. It simply means you decide before you go how you will enjoy yourself. The real enjoyment comes when you return, you keep that vacation glow, and your memories are not tainted by regret. You think planning ahead takes a lot of work? How hard do you work to pay off your credit card after a vacation? And planning your trip is way more fun!

Your goal is to use your money in ways you will remember and enjoy without guilt or buyer’s remorse after the fact.

What tips do you have for taking a vacation and not overspending?

Photo credit: Amy Sayre of Amy Sayre Photography