How Much Should You Budget for Your Dream Vacation?

Planning an amazing vacation is exciting, but figuring out how much to budget can be stressful. With flights, hotels, meals, activities and more, costs can add up quickly. But you can still get away without jeopardizing your financial security. You just need to spend some time figuring out how much vacation you can afford, look for ways to save on expenses, and then plan a trip that fits within your budget.

Here's where to start:

Know Your Budget

The amount of vacation that you can afford depends on your income and savings. One popular rule of thumb, called the 50/30/20 budget, suggests that you break your income down this way:

– 50% of take-home income goes to non-discretionary expenses like rent, childcare, and utilities

– 30% goes to discretionary spending, including vacations

– 20% goes to savings 

Next you need to look at that 30% of discretionary spending and decide how much you want to put towards a vacation.

With that figure in mind, you can start to plan realistically for what your getaway might look like or if a staycation is your best option.

Assuming you’re not camping or staying for free with friends or family (lucky you), these guidelines can help you determine how your vacation money will be spent:

– Accommodations: 30% of your vacation budget

– Transportation: 20%

– Food: 15%

– Activities/Entertainment: 25%

– Incidentals:  10% (parking, baggage fees, travel insurance, tips, etc.)

Again, these are just guidelines. How and where you’ll spend your money depends largely on your vacation style and priorities. If you’re a foodie and want to eat at 5-star restaurants or you have your heart set on a guide leading you on a once-in-a-lifetime fishing trip, you can shift your allocations to accommodate your preferences.  

The most important thing is to set a realistic budget from the start so you can relax and enjoy your dream vacation.

If in the planning process you find your budget is coming up a little short of your vision, don’t cancel your plans. Instead, consider these ways to save on travel:

Travel Off-Season

You can save big by traveling during the off-peak or shoulder seasons. Flights, hotels and activities are typically 30-50% cheaper. The weather may not be perfect, but you'll have fewer crowds and more bargaining power.

Skip the Hotel

In many cases, rent-by-owner homestays (e.g. Airbnb, VRBO, etc.) can be far more affordable than a hotel. No, they don’t come with housekeeping, but they frequently come with a kitchen that will allow you to save money by preparing your own breakfasts and other meals. 

Fly On Off-Peak Days or Times

Spend some time exploring different departure dates and times for potential savings. The cheapest days of the week to fly tend to be Tuesday, Wednesday and Saturday, and the cheapest flight times are typically in the early morning or late at night. 

Check One-way Flight Deals

For domestic travel, one-way flights with different airlines. In some cases, you can save several hundred dollars by booking this way.

Set Up Price Alerts

If you’re flying, setting up online price alerts for flights to your desired destination to take advantage of great prices. You may need to shift the timing of your trip to get a good deal but if it’s the difference between staying and going, it may be worth it.

If numbers still aren’t working, you might consider adjusting your destination, or, plan for a staycation this year and give yourself a full year to plan and save for next year’s dream destination.

DISCLAIMER: This article is meant for educational purposes only and is not intended to be construed as financial, tax, investment or legal advice.