Summer Vacations and Destination Weddings Are Back — How to Save and Spend With Restraint as Life Returns to Normalcy
Wouldn’t it be nice to go on vacation and never glance at your bank account balance or credit card limit? However, that’s not practical for most people. Whether we’ve saved all year for a vacation (or that destination wedding), are using some of our tax refund to fund a getaway, or otherwise have a travel budget allocated, most of us have to keep an eye on our finances when we travel.
Otherwise, we might run into a trap that Vadim Verdyan, head of advice for the “Genius” team at personal finance app Albert, calls “bottomless spending.” If you don’t have a budget in mind when you plan your vacation, he said, you could risk credit card debt — and attached high monthly payments — that could leave you living paycheck to paycheck.
Further, after two years of limited travel people are more likely than ever to overspend, he said. “Historically, summer has always been the second most expensive season behind the winter holidays,” he said in an email interview. “This summer has the potential to be one of the most expensive yet.”
He attributed the greater costs this year to higher gas prices, significant inflation, and an overall rise in travel prices due to increased demand. Travelers will be spending more to get the same amenities, service, and experiences as they did pre-pandemic.
However, recent numbers from American Express Travel also show that people are splurging a little more this year. Audrey Hendley, president of American Express Travel, told Forbes that 2022 bookings are up 35% compared to 2019. She said, “Eighty-six percent of respondents expect to spend more on travel in 2022… They are splurging a bit, upgrading to premium.” Survey respondents reported earning $70,000 or more annually.
Of course, if you have the means to do so, there is no reason not to go all-out this year. But for many, it might take some careful planning to make that dream vacation happen.
Decide If You Can Travel At All
Verdyan emphasized that travel should never come at the expense of saving for retirement, paying off high-interest credit card debt, or building up an emergency savings account with three to six months of living expenses. If you can meet these three criteria each month, Verdyan says, “Then you likely have room in your budget to splurge.”
However, sometimes even a short trip can help save your sanity and keep you on track with your financial goals. That’s when it’s time to create a budget.
“Most people have a fixed amount of money coming in each month, so to spend more on something like travel, you’ll have to reduce your spending in a different category,” Verdyan said. “Usually, the easiest places to make cuts are shopping and eating out.”
You might also consider earning side income by taking on gig work, selling items you don’t need on Facebook Marketplace, or even cashing in your credit card rewards to help pay for your trip.
“A lot of credit cards offer multipliers for redeeming points for travel, which could give you that necessary boost in value and make it a little more affordable,” Verdyan said.
Determine How Much You Can Afford to Spend on Travel
“With the increase in travel costs, people may have to make cutbacks or shorten trips,” Verdyan told GOBankingRates. “For example, if you had spent a year saving $2,000 for a trip that now costs $2,500, you’ll have to make some changes. However, if you booked flights and hotels in advance, you may have missed all the price hikes. Booking far in advance is something we always recommend doing to save money.”
If you didn’t book in advance — or if you want to make sure you have the money you want for discretionary spending on your trip — you’ll want to research average costs at your destination and set a budget for different line items on your trip, from tourist activities to meals and drinks.
“Inflation affects everyone, but it doesn’t mean people can no longer afford the things they want,” Verdyan said. “They just need to be a little smarter with how they spend.”
Consider an All-Inclusive Resort When You Book a Vacation
If you don’t want to worry about counting every dollar while you’re away, consider booking a vacation at an all-inclusive resort. But make sure you know exactly what’s included before signing on the bottom line, as some resorts may not include certain tourist attractions or alcoholic beverages.
Protect Your Trip With Travel Insurance
Finally, in today’s age of uncertainty, it’s smart to book your trip with a credit card that offers travel insurance in case you need to cancel or postpone your trip — or in the event your excursion is cancelled for reasons beyond your control.
Even if you’re opting to use a travel rewards credit card for the benefits, make sure to stay within your budget for the trip. “You shouldn’t use credit cards for points, perks, or benefits if you’re not paying off the full statement balance each month,” Verdyan warned. “The interest charges will cost you much more than what you’d get from rewards.”