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. 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.

Don’t Let a Credit Card Bill Wreck Your Post-Vacation High

You’ve just returned from vacation, and you feel incredible. You’re relaxed and basking in the memories from the sites you saw, the people you met, and the food you ate. 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? You look at your credit card bill 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 short-lived happiness. As soon as you get back, you may experience some serious buyer’s remorse, and that’s no way to come back from vacation.

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

(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.)

Even if you are in a position to spend whatever you want on vacation, it’s still important to have a budget.

You will face more temptations while traveling than at most 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?

In episode five of our podcast The Saver and The Spender we talk about saving and budgeting for vacation if you prefer listening over reading.

How to Budget for Vacation

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

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.)

Your goal is to set an amount for each necessary category. Don’t just guess your expenses. 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.

After you total up your necessary 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? Based on your reaction, you may need to make some revisions to your budget.

Hotel accommodations can add up very quickly.  If you are flexible in where you stay, you have options that can save you a ton of money.  Here are a few of our favorites:

Same goes for flights. You can end up spending the majority of your budget on this one expense. When you are looking at flights or car rentals here are a few of our favorites to check out:

Plan for the Fun

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.

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.

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 souvenir, etc. Our estimate for how much that day trip would cost was very easy to determine. Your total amount of planned fun 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.

Get Your Cash Envelopes Ready

Before you leave for your 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 a 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 at the beginning of this post, you could even separate the budget or envelopes by Week 1, Week 2, Week 3 and fund them just before the week begins. It’s easier to keep track of it all.

Don’t Go Too Long Without Taking Stock of Your Finances

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.” Make it super quick. This small move keeps you in check while on vacation.

Start a Vacation Savings Fund

The best way to plan for a vacation is to start a separate savings account to fund them. Ideally, 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.

Here’s our guide to creating multiple savings accounts.

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. Do you think planning ahead takes a lot of work? How hard do you work to pay off your credit card after a vacation? Planning your trip is way more fun.