My family has recently discussed taking a family trip to Disneyland in the near future and one of my sisters said “If we can afford it by then, we’d love to go!”. To which they immediately prompted me to write an article about how to save money for a vacation. So here it goes:
First off, whether you are saving for a vacation or any other expensive expenditure like for tuition or having a baby all of the steps are the same. I am currently saving for a few expensive items but I will focus on tuition for Alex’s college.
How to save for a vacation Step 1:
Figure out the cost
Learning how to save for a vacation or any other extra expense is all about reverse engineering the problem. So first, you have to know the end result. The end result in this case is what is this trip going to cost? Figure out the basic figures like hotel, flights, event tickets, transportation, etc. Then figure in some extra expenses you might not think about like food, tips, souvenirs, etc. I like to think about what the costs are going to be and then add an extra 10-15% to cover all of my bases.
The cost for Alex’s tuition for his next quarter is going to be about $1500 between books and fees plus the general tuition. That’s a huge shock to the bank account if you aren’t prepared for such an expense.
How to save for a vacation Step 2:
Figure out how long you have to save
Whether you are trying to figure out how to save for a vacation, a new expensive toy, or any item you want to save for you need to have a time table. For example, for Alex’s tuition we know we will be paying about $1500 every 3 months as each new quarter starts.
Once you know how long you have to save for you can move to the next step.
How to save for a vacation Step 3:
Figure out how much needs to be saved from each paycheck
You can figure out how much you need to save either each month or from each paycheck. I like to figure out by paycheck because it feels smaller coming out weekly. (Alex and I are on opposite pay schedules so we have a check coming in every week.) For Alex’s tuition we know we are paying $1500. We have 3 months to accumulate that needed money. This equals out to 13 paychecks for us. Now for the math part:
Or we could just save $500 per month. It all depends on how you do your budget.
How to save for a vacation Step 4:
Have a secure location for your money
This step is extremely important when you are figuring out how to save for a vacation because it is so easy for money to get lost in your bank account if you are not actually accounting for it being gone. I have read several different methods you can use to ensure your vacation savings really gets used for your vacation:
A Savings “Bucket”
This is the method I follow because I am very aware of my budget and where each dollar is assigned to go. I do not assume because there is money in my account that I get to spend it, rather, I know that my bank account is a pool of different buckets that get used for various expenses. For example, I have
- a tuition bucket
- a physical therapy bucket
- an insurance bucket (we pay for our insurance in one lump sum to save money on a yearly plan!)
- a “pay off car” bucket.
These are areas where I know money gets assigned each paycheck that I keep track of with my budget.
Once my money is assigned I do not touch it even if it’s just sitting in my bank account.
An Extra Savings Account
If you prefer to keep your money separate when you are first learning how to save for a vacation you might prefer to have an additional savings account. This works great because savings can happen automatically since you can set up automatic transfers from one account to another. It’s a great way to physically see how much money you have saved for your vacation and those numbers rising is always great motivation!
The Envelope System
Perhaps the most secure way on how to save for a vacation is to use the good old envelope system. This means you will be pulling cash out of your bank account based on your frequency of withdrawals you determined in step 3. For many this method works because the money is out of sight out of mind and you are not tempted to spend it until you are actually ready to spend it on what you planned. Your vacation!
The cash envelope system works because it is harder to spend cash frivolously than it is to just charge it. Plus, you can make your “envelope” into anything you want to make it fun! If you have kids you are planning on taking to Disneyland perhaps you can make a shadow box “envelope” with some Mickey ears on it and you can put your cash in it. This gets everyone excited as Mickey’s ears fill up with the money for your trip!
How to Save for a Vacation when on a tight budget
So now you know how to figure out how to save for a vacation, but how do you get that money when you’re already on a tight budget?
If you are determined to take this vacation the key is in self-discipline, sacrifices, and extra effort. It mainly comes down to creating a budget and sticking with your budget.
The self-discipline part comes from actually budgeting in the savings and ensuring you don’t spend that savings. Even for an emergency! (That’s what your emergency fund should be for!).
The sacrifice part comes from maybe eating out less (lowering your budget on entertainment, for example). Or living on some boring menus for awhile if you need to figure out how to save for a vacation.
If your budget is maxed out already, then it’s time for the extra effort by picking up an extra income source or two. There are so many options out there! And many of them are work from home options if that floats your boat. My personal go to when I was trying to earn extra income was always working overtime. Not all companies allow this, but if yours does, take advantage of it! I found it the easiest because I was already there and in the groove of working.
Other options include getting a second job, whether that’s at a brick and mortar location or working something online, again, there are plenty of options.
Conclusion
The key to learning how to save for a vacation comes down to knowing how much, how long, and how frequently your intervals of adding to your savings you can do. Once you have that part figured out the rest is securing that income towards your goal. I personally love saving towards a goal. It makes the savings process easier and more exciting. Plus you get a couple of great rewards at the end:
1) you get a trip and 2) you didn’t go into debt to take that trip!
What about you? What are some of the struggles you have in saving for a vacation or other expense? Or what are some of your personal tips and tricks? Please let us know in the comments below!
I am so glad you are here and am so excited to meet you and get to know you better. Thank you so much for trusting me to help you with something as important as finances. My goal is to help you break the bonds of debt and get into Financial Freedom!