Going on vacation? Pack a little financial discipline.
Mel Barnes, SVP – Chief Operations Officer
A great summer vacation can create memories that last a lifetime, but too many families create something else that can last nearly as long: credit card debt. By planning, saving, budgeting and making smart choices while on your trip, you can have a great time without suffering vacation regret. Here’s how:
Create a budget.
This is step one, and it’s the most important. If you set a budget and stick to it, you can avoid saddling yourself with months or years of debt after returning from vacation. You’ll also be among a very smart and disciplined minority of Americans—according to a recent LearnVest survey, 74% of people say they have gone into debt to pay for their vacation.
Setting money aside each month for travel will help determine your budget. Once you know how much money you have to work with, planning a trip becomes easier. This is when you have to be honest with yourself. If you had your heart set on a two-week trip to Europe, for example, but this year’s budget doesn’t allow it, then be prepared to adjust your travel plans. Either wait until you can afford that trip, or find another place to go.
Don’t touch that retirement account.
Yes, you need a good vacation, but if you’re not retirement age, is it worth tapping into your 401(k) or IRA? Absolutely not. Withdrawing retirement money before age 59½ adds a 10% penalty on top of any deferred taxes. And let’s say you took out “only” $5,000. That amount, left alone for 20 or 30 years in a good retirement account, could grow tenfold by the time you reach retirement age.
Bottom line: Don’t rob your future self to temporarily please your present self.
Credit cards: Yes or no?
Speaking of your future self, most experts advise that you leave the credit card at home while on vacation. For many, it’s just too tempting to pull out the plastic when you’re having a good time, and the next thing you know, you’re spending $3,000 on a trip that you’d only budgeted $2,000 for.
On the other hand, certain credit card companies offer rewards like airline miles, discounts on rental cars and hotel rooms, and extra points for a wide range of travel-related purchases. So, yes, take advantage of whatever deals your credit card offers, but don’t charge beyond your means to pay off your card in a timely fashion.
Other ways to avoid overspending on vacation.
• Research your vacation spot. Investigate everything from the best places to stay to what activities are available in the area. For accommodations, try sites like Airbnb or VRBO®, which allow you to rent out your own space or share a space with the property owner.
• For flights, try Cheapflights, Expedia, Kayak or Priceline. You can set up price alerts to monitor price fluctuation for your desired location and dates. Book well in advance for the best deals.
• For activities and tours, try Viator or TripAdvisor. Certain excursions or activities might be cheaper on certain days.
• Plan all of your meals. Dining out can add up and bust your budget. If you can, choose lodging that offers a kitchen, so you can grocery shop when you arrive and save a lot of money.
Can you have a great time on vacation without suffering financial regret? Yes, if you plan your trip well in advance—and stick to the plan.