The Right and Wrong Way to Afford a Vacation

afford a vacation

February 20, 2018 • Finance, Travel

We all need to get away from our lives from time to time, but financing a vacation can be costly in more ways than one. If it isn’t done correctly, it can add more stress to your life and create problems further down the road. By using a little planning, affording a vacation can be done without worsening your financial situation.

 

How Not to Pay for Your Vacation

The first step is deciding if there is room in your current budget for a vacation. For example, if you need advance check cashing to make ends meet once a month, it’s probably not the right time to take a vacation. Reevaluate the household budget to see if there are any unnecessary expenses and if so, eliminating them may free up more monthly income. If enough income is freed so that short-term lending is no longer necessary, vacation plans can go forward.

 

You might be feeling frustrated with your attempts to save for your dream vacation, but don’t be tempted to make rash decisions. One common mistake people make is to pay for their vacation with a credit card. In fact, borrowing money to pay for a vacation in this way can be the worst decision you make, because it ties you to a debt that will end up costing you far more than the cost of the trip.

 

First, you’ll have to consider the high-interest rate you’ll be paying. If you’re just making the monthly minimum payment, you’re likely only paying off a small portion of the principal balance with most of your payment going toward the interest. This means you’ll be paying off debt for years to come. Unless you know you’ll be able to cover the debt in a relatively short period, financing a vacation in this way is not the way to go.

 

Yet, Credit Can Be a Force for Good

That’s not to say you shouldn’t use your credit card at all, while on vacation. Rewards, such as airline miles, can work to your advantage, so it might be wise to pay for one or two individual items with your credit card. Hotels also offer rewards that can lead to free stays, so, if you use your credit card wisely, you can even profit from it.

 

Again, it’s important that you give this option some thought. If using credit in this way is going to place an extended burden on your budget, this may not be an option you should consider. Also, some hotels and airlines require that you get their special credit card and will reward your loyalty with points. While this sounds like a good deal, check out the interest. rates are likely to be very high.

 

Set Up a Special Savings Account

The best way to finance a vacation is to pay for it yourself, through your own savings. Many people set up a special savings account solely for this purpose and have deposits automatically withdrawn from their pay each week. This helps to make the savings easier and the account will grow over time.

 

You might be ready to point out that you don’t have that extra money, but take a look at your lifestyle first. Giving up just one latte a week can add $4 to your weekly contribution and giving up on pizza night might add another $20 or $30. Certainly, these are sacrifices, but just think about the vacation you’ll be able to buy yourself with that saved money.

 

Downsizing Plans and Increasing Hours

Another suggestion worth considering is downsizing your vacation plans. This doesn’t necessarily mean a “staycation” versus traveling someplace exotic, but rather finding ways to chip away at the travel costs themselves. Using public transport rather than renting a car, for example, could save someone a substantial amount of money.

 

Whether you have yard sales, pick up extra work, or begin selling homemade crafts, paying for your vacation out of pocket is the best decision you can make. Once you come back home, you won’t be slapped in the face with a new debt that stigmatizes the joyful memories you just created. Taking a vacation is supposed to relieve your stress, not add to it.

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