Law #1: Master the Art of Paying for Your Vacation to Have More and Better Options
The Law
Paying for vacations is probably one of the top two most impactful factors that prevent you from taking more of them, running neck-and-neck with finding time to take them. Whether you travel solo, in a group, or as a romantic couple, and whether you’re paying for your vacation or someone else is footing the bill while you do the planning, this skillset will be vital at some point in your vacationing life.
Your Keys to Power
Method 1: Plan and then save. The two steps of this method are simple—(1) plan your trip and then (2) save what you need to take that trip. This method is excellent for people who think more about checking off a bucket list, and it can feel gratifying. Think about it. You plan a trip somewhere, start your saving engine until you reach the amount you need, and then your vacation is your reward. Often, we associate this type of vacation planning with massive trips—the ones that cost, say $10,000-$15,000 per person and may require us to save for a while before pulling the trigger. But the same process applies on the other side of the spectrum. Maybe your trip only costs $500, and the second you’ve saved that amount, you’re ready to go. Perhaps that $500 takes you a month to save, and after that trip, your next one will cost $3,000. Save that, and then you’re taking off again. You see how this method works for large and small experiences alike and can feel like a huge reward at the end of your saving journey?
So whether you’re planning to travel once a year or as many times as you can reach your savings goals in a year, whatever’s on your bucket list, put a price tag on it and start saving. Reach your goal, and then take your reward. You’ll have earned it! The handy calculator on Tab 1 of our Vacation Finance Planner [free download], will work out your saving goal for you with only 4 pieces of information from you:
The total cost of your trip.
Your desired trip date.
The date you plan to start saving.
How much you have already saved if anything.
Drop those 4 pieces of information into Tab 1 and watch the magic happen.
Method 2: Save and then plan. This method flips the first option—(1) save for a designated period and then (2) plan a trip that fits within the budget of what you’ve saved. This method is excellent for interval travelers—people who believe strongly in traveling once every so often, like every 6, 12, or 18 months. With this type of savings plan, you save for whatever time you’ve designated and then plan the best damn vacation you can with your budget. Whatever you save, rest assured you can find a fantastic vacation to fit within the price range of your budget, and we sort of love how freeing that is! Tab 2 of our Vacation Finance Planner [free download] will help you track your savings and tell you your final trip budget.
Method 3: Finance it. Hang tight. We’re heading into some risky territory—credit. Scary, we know, but if managed well, it can be perfectly reasonable to finance a vacation if that’s where you’re at right now financially. When we say finance, we’re being very specific about the type of financing that means you take a vacation now and then pay for it later, not paying toward it in advance like a layaway plan. (A layaway plan is like the first method and isn’t really financing in the same sense.)
When you finance a vacation, you can get into risky territory if you overindulge and end up with a bill that you can’t pay for a while or at all. To avoid financing a trip that costs more than you can pay, don't finance something that will take you more than 4 months to repay. Planning to pay something over an entire year, or even 6 months, can be too risky given how volatile the economy and job market can be. To finance a trip, we’re going to follow 3 simple steps:
Figure out how much you can pay in 4 months.
Figure out how much interest you’ll have to pay on what you finance.
Spend only the remaining amount on your vacation.
Tab 3 of our magical Vacation Finance Planner [free download] does all of this for you without any hassle. Just go to Tab 3, drop in your details, and watch the magic happen! Here’s an example from the planner with the assumption that you can pay $1,000 per month:
You’re able to pay $1,000 per month for 4 months.
Your credit card interest rate is 29.99%—ouch!
Putting those details into Tab 3 reveals your spending budget in 2 seconds: $3,762.
Spend up to that amount, pay $1,000 per month on your credit card bill, and you’ll be vacation debt-free in 4 months!
Side note: Why can’t you spend the whole $4,000? Most of you probably just took our word for it, but if you didn’t, the simple answer is that we want you to plan for interest. That’s where the other $238 is going, which the planner calculates for you. If you can’t pay a credit card balance in full each month (you should, by the way), you have to pay something called interest. Interest is what the bank charges you for the privilege of loaning you money that you’ll pay back later. The longer it takes you to pay that balance down, the more interest you’re going to pay.
Practical Application
Don’t set yourself up for failure. Manage your expectations and set your sights on something achievable. Like older people from the South used to say, "you can't have steak and lobster dinners on a rice and beans budget." Similarly, you might not be planning 21-day international excursions across Europe if you're not at that financial level right now, and that's fine! Whatever budget you generate from the three methods we listed above, plan the best damn vacation you can with that amount, and be proud of it.
It’s OK to aspire, but don’t compare. We don't mean that you shouldn't aspire to more indulgent experiences. You absolutely should. Indeed, aspirations can give you the energy you need to push yourself to higher levels of accomplishment. So aspire, but don't get caught up in the social media comparison culture that can make your 10-day, 3-star Hawaiian vacation feel like it pales in comparison to someone else's month-long vacation at a 5-star resort.
Consider all elements of currency. When it comes to vacation planning, money isn't the only currency. Do you have hotel points that you can use for a night, a few nights, or for even a week or more of accommodations? If so, that's currency. Do you have credits to apply to airline tickets or vehicle rentals? If so, those currencies are helpful and contribute to a fabulous experience. When you're using our Vacation Planner, consider your other currencies. If you don't need to save money for a specific part of your vacation because another form of currency covers that part, subtract that out when you run your numbers through the planner. Similarly, if you're traveling in a group that splits expenses, check how comfortable you all would be if you contributed part of the value through a currency other than money. For instance, if the total trip would cost $5,000, but you can cover the accommodation, which would've been $2,500 using your points, that may be a sufficient contribution from you with your travel partner(s) covering the other $2,500 with whatever method they can cover it. Be careful here because not everyone thinks about money the same way, but it's certainly worth consideration and a conversation.
Consider ways of getting free accommodation. If you're traveling on a tight budget or love the experience of connecting with other people, consider a home exchange or housesitting experience. Swapping homes with someone else could allow you to experience their home while they experience yours and get free accommodations. Housesitting could also allow you to share someone else's home, take care of plants or pets, and get free accommodations.
Go with a group to get more bang for the buck. If you love fabulous experiences but are on a dime, traveling with a group could help reduce the financial hit you each take personally. There is economic power in traveling with a group, but there are sacrifices that you must make when you travel with groups as well. Think through all the pros and cons before you commit.
Sacrifice temporarily for a more significant impact later. Don't hesitate to sacrifice something on the front end for a more incredible experience on the backend. For instance, if you're used to traveling once every 12 months, but this time you have a magnificent experience in mind that requires a bit more than you're able to save in a year, consider delaying the experience for another three or six months to set aside the extra cash.
Know when to stop. Some people enter into vacation experiences to stay as long as absolutely possible. That works for some but not for others. Listen to your mind and body if they tell you you've had enough, and head back. Milking the extra day, week, or 10 days could create financial setbacks from overindulgence. Don't fall victim. If you're following our methods wisely, there will be many more vacations in your future.
Segregate savings. If you're using methods one or two, segregate the money you're saving in a separate account. Segregating these funds will help you make sure that you see them as something other than bill money or disposable income. Treat it like money that's locked away.
Automate savings. When saving money, we recommend automatic transfers into a vacation savings fund so that the amount you want to save each month is consistent rather than saving whatever is leftover. That way, you’re treating your vacation savings like something of a sacrifice upfront. Understand that sometimes, even the best-laid plans have hiccups. If your savings or earnings have more volatility, you may do better with method two, where you can save as much as you can and then take a vacation with whatever budget you’ve been able to amass.
If you finance your vacation with a card, try to use a single designated card. It won't always be possible, but try to use a single, designated card for your vacation if you're financing it with a card. This way, you won't mix other expenses with your vacation expenses, and the method we've laid out should work seamlessly within a few dollars. If you use a card that you also use for other purchases or a card that's already carrying a balance, the interest you accrue for other purchases could get confused with vacation expenses, making your vacation payoff harder to track.
Earn for your next trip during the current trip. If possible, work your accommodations in a way where you earn points or benefits for your next vacation. A good example is Marriott Bonvoy’s customer loyalty program. Registering for a simple, free account allows you to earn points that you can use toward your next experience. Most major brands like Hilton, Wyndham, and Choice Hotels have loyalty programs. Here’s a round-up of some top hotels’ loyalty programs. If you’re more brand agnostic, you may enjoy the loyalty program of a hotel booking service like hotels.com, which boasts a free night for every 10 nights you book and stay.
Tack onto corporate travel if possible and allowed. If you travel for part of your job, a great way to get more bang for your buck could be to tack your vacation onto an already paid-for corporate trip. You'll have to pay for your additional lodging, experiences, food, etc., and maybe a part of your flight, but that could save you hundreds or thousands of dollars.
Bake in a gig. While we don't advocate doing a lot of work during your vacation if that’s not how you get down, it could be beneficial for you to bake in a gig while you're traveling, particularly for content creators. For instance, if you're on a trip in Cypress, grab some excellent photo content or a round-up of some strategic activities like restaurants or museums if you can get paid for it through a side hustle without it sucking the life out of your vacation.
Don’t discount free activities. When you're traveling, don't discount free activities. Check out local resources on sites like this one. Nature walks, visits to parks, beaches, etc., often don't require payment. If getting to those types of activities requires a vehicle rental, you may be in a situation where renting a vehicle to get around could allow you to do a lot of great activities that don't require payment.
Book accommodations with kitchens. Booking accommodations with partial or full kitchens can save a lot of money on food outing experiences while allowing you to munch on dinners, quality snacks, and freshly cooked treats.
If you’re financing, don’t go over 4 months for repayment. You may be tempted to put 6 or 9 months into Tab 3 of our Vacation Finance Planner. Why not? It could allow you to afford a grander trip, and maybe you can do more exciting things, right? We get you, but don’t do that. Instead, take a trip you can afford to pay back in 4 months or less, and then start saving with methods 1 or 2 immediately for the next vacation. Why? We want you to avoid as much interest as possible. Using our example above, why spend $4,000 for a $3,762 trip when you could save $4,000 and take a $4,000 trip? Get the most out of your money and stop paying the bank to do something you could just as easily do for yourself.
Authority
“You don’t have to be rich to travel well.” - Eugene Fodor
“To travel is to discover that everyone is wrong about other countries.” - Aldous Huxley
“There’s a sunrise and sunset every single day, and they’re absolutely free. don’t miss so many of them.” - Jo Watson
“Stuff your eyes with wonder, live as if you’d drop dead in ten seconds. See the world. It’s more fantastic than any dream made or paid for in factories.” - Ray Bradbury
“Adventure is worthwhile.” - Aesop
“Traveling – it leaves you speechless, then turns you into a storyteller.” - Ibn Battuta
“I am not the same, having seen the moon shine on the other side of the world.” - Mary Anne Radmacher
“Travel is never a matter of money, but of courage.” - Paulo Coelho
Our Vote
Over the last decade, we’ve used these 3 methods for planning a vacation, but we’ve stopped using method three altogether. Now we save with a vacation fund that we use to travel at least a couple of times per year. We have most often used option two and then backed into a vacation based on how much we’ve saved, but this year we’re shifting into method one because we have some specific experiences that we’re looking forward to conquering that will cost a bit more than our typical past vacations—think taking massive groups of family members on excursions. As they age, we’re excited to get them out and about and keep them active, so that’s important to us.
Reversal
What reversal can there be to this law? Even if someone covers your travel experiences, learn the art of resourcefully allocating expenses to experiences. The person who covers your travel experiences will appreciate your fine attention to financial detail. And remember, that same person who covers your costs today may not be a factor in your life forever. Master the science and art of resourceful travel, planning, and saving to enhance a lifetime of travel victories.