Planning for the big summer vacation? Be financially savvy and take these tips
Summer is just around the corner and for many of us, that means one thing: vacation. Whether you’re dreaming of beach sunsets, mountain trails or a quiet weekend getaway, taking a break is good for the soul. However, too often, summer travel comes with a side of financial regret — especially when the credit card bill hits the following month.
The good news? You may not have to choose between enjoying your summer and staying on track with your financial goals. With a little planning and a few smart moves, you could make the most of your vacation and your money. Here are some great financial considerations to keep in mind as you plan for traveling this summer:
Ensure the basics are covered
Prior to planning for your trips, it’s generally a good idea to ensure that you have some financial basics covered. Some examples include:
Have an emergency fund established. As a general rule, it is recommended to have three to six months of expenses saved for emergency expenses so you can avoid being forced into high interest credit cards.
Contribute at least 12% to 15% of your pre-tax income to retirement accounts (this number can vary depending on your situation).
Ensure you are spending less than you earn.
Often, a crucial aspect in personal finances is to ensure that your lifestyle expenses are less than your household income. As the saying goes, “if your outflow exceeds your inflow, your upkeep will be your downfall.”
Set a travel budget
Decide how much you can comfortably spend on a vacation and strategize as to where the funds will come from. Can you cash flow this expense (perhaps a weekend getaway) or will it require monthly savings over a period of time?
Once you have a preferred spending amount, create a budget that allocates the overall spending to certain categories. Be sure to include the following in your budget: Transportation (flights/gas/rental cars), lodging, food, activities/experiences, souvenirs/gifts, pet sitting, airport parking, fees (Learn about potential currency conversion fees or foreign transaction fees before you make purchases abroad.)
After accounting for the expenses, if you find that a trip this summer isn’t in the cards financially, don’t let that discourage you. Instead, create a savings plan now to set yourself up nicely for next summer (we all know it will be here before we know it).
Consider travel insurance
We purchase insurance to transfer the risk of perils. Travel insurance is no different. It is designed to help protect you from unexpected costs that can come up while you’re traveling. It can include coverage for things like trip cancellations, medical emergencies, lost luggage, and other disruptions that could affect your plans or your wallet. It’s important to note that your health insurance coverage may not apply outside of the U.S., which provides yet another reason to consider travel insurance.
Experiences things
As you plan your vacation this summer, pat yourself on the back for prioritizing an experiential purchase over a material purchase(s). Research shows that folks are often happier when they spend money on experiences rather than things. Experiences create memories that can be fondly reflected upon for years (and even decades) to come, while material items tend to depreciate in value quickly after the initial purchase. So, as a last tip, when you’re planning your vacation with your loved ones, ask yourself, “what experiences/memories do I hope to create on this trip?”.
Jordan Priddy, CFP, EA is a member of the Financial Planning Association of Greater Kansas City chapter and an Associate Wealth Advisor at Focus Partners | Wealth. Additionally, he is a CERTIFIED FINANCIAL PLANNER Professional and Enrolled Agent.
Do you have financial topics or questions you’d like answered by a CFP professional? If so, submit your question or topic to KCFPA@gmail.com and your topic/question may be featured in a future article!