First, let me say, that if you must take out a loan or go into debt to take the vacation you want, then you can’t afford it. You’d be better off taking a summer vacation within your budget now and waiting to take the dream trip when you can afford it. You don’t want to be stuck working overtime for the next five years to pay off your vacation debt. Here are my other tips for avoiding vacation loans and debt.

Plan Far Ahead
Everyone has a dream trip. Mine was my honeymoon. Thanks to the strong dollar and careful planning, we managed to spend only $3,000 on the ten-day trip, which was covered entirely by cash wedding gifts and airline miles. If you have a trip in mind, start planning for it now by researching travel deals and prices. Then start saving.

  1. Set a target date for the purchase of the trip and then calculate how many months away it is.
  2. Determine the cost of the trip. Allow at least 20% overage for cost increases and the fluctuating dollar.
  3. Divide the cost by the number of months. That’s how much you need to squirrel away in order to pay cash for the trip.

Note: you should actually charge the reservations, tickets, and other costs to a credit card in order to receive purchase protection and get a better currency conversion rate, but pay off the credit card in full from your savings.

Create a Vacation Savings Account
This is not your emergency fund, although it could be the same account if you’re very good at keeping the amounts separate in your accounting. If you don’t trust yourself, just open another online savings account and set up a direct monthly transfer.

Avoid Buying Tchotchkes
We all enjoy souvenirs, but the things you buy on vacation should have meaning. If you have a keychain collection that you display, then those are great souvenirs. If you have a bunch of keychains stuffed in a drawer, then they’re a waste of money. I like to buy small pieces of art when I travel. They’re displayed in my apartment.

You should plan to buy something that the region is known for. For example, if you’re visiting Venice, consider buying something made from Murano glass that you will actually use. On the other hand, don’t go to Ireland and buy an Irish wool sweater if you hate wearing wool

Set a Souvenir Budget
Before you go, set a budget for your souvenirs. For big-ticket items, research the cost of buying the imported item locally. Then look for a cheaper price (converted into their currency) over there. Avoid going over the budget unless it’s really, really worth it and you’re willing to cover the cost by economizing on another aspect of the trip (like a meal).

If you can, think about it for a couple of days before you buy it. Try to buy your souvenirs near the end of the trip (or the end of the day if you won’t be returning to that attraction again) so you’ve had time to review your options.

Don’t Be Stingy
Of course, don’t be so budget-minded that you refuse yourself any treats or souvenirs. Be sure to have at least one great meal and stay in a decent place. Making yourself miserable with uber-cheap lodgings or refusing to eat out will only prompt you to make up for it by spending more money on other things, or leave you with bitter feelings about the place.

When planning my honeymoon, I opted to save $20 on a room for one night. We regret that decision to this day – we wound up on a lumpy, rough mattress above the smoking patio of a bar where the patrons sang Billy Joel off-key for half an hour. We vowed never to return to that town again.

Yes, you do deserve a vacation, but you shouldn’t have to overspend to enjoy it. By planning ahead and sticking to my few simple tips, you’ll not only avoid debt, you’ll also enjoy your trip and your memories that much more.

Comments

One Response to “How to Avoid Vacation Debt”

  1. My Small Cents on April 29th, 2008 10:12 pm

    Great post. We just recently returned from vacation, and we planned for it far in advance. We set aside a large sum of money (for us) and payed for as much in advance as possible. While we did go over budget, it’s the first time ever that we’ve come back from vacation and not had financial problems because of it.

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