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How to build a realistic vacation budget

Family loading luggage into car top box before road trip
Thomas Barwick/Getty Images

For some, a vacation implies stress-free days relaxing in a hammock by a lake. For others, it means seeing every historical sight in a big city. You may prefer action-packed adventures with climbing or boating, simple days in conversation with faraway family or some combination of the above.

However, whether you're planning a 10-hour road trip or a 10-day international getaway, planning a vacation takes time and preparation. The practical task of knowing how to budget for a vacation can help make your dream trip a reality.

Creating a budget and sticking to it guarantees that your vacation goes off without a financial hitch so that you can relax the way you deserve to. The more time and thought you put into it, the more relaxing your time away will ultimately be.

How to budget for vacation: Estimating costs and making a plan

Learning how to budget for a vacation involves defining the kind of trip you want, estimating costs and making a detailed plan for where you'll find the money. Here's how to get started:

1. Figure out what kind of trip you want to take

As early as possible, sit down with any fellow vacation-goers—be they roommates, family or friends—and hash out the goals for the trip. Ask the following questions and talk through each one. It may be valuable to answer in terms of ranges, knowing you might splurge in one category and economize in another.

  • How long do you want to be on vacation?
  • Where do you want to go?
  • What do you dream of doing on vacation?
  • How will you get there?

Finally, consider a ballpark amount of money you expect to spend on the trip. Having an initial figure—with the flexibility for it to change—will give you the breathing room to revise your plans later, either by adding or subtracting from that budget.

2. Keep track of vacation expenses to budget for

A spreadsheet can be a valuable resource to outline all of your expenses for your trip, from big costs like hotel stays and plane tickets to less expensive items like transit passes or museum tickets.

Your categories might look a bit different, but this is a good starting list:

  • Lodging
  • Transportation
  • Food
  • Activities/entertainment
  • Fees
  • Tips for service
  • Supplies, from camping gear to special clothing to ski rentals
  • Unexpected costs (save a little extra for last-minute purchases or inflation)

For each line item, do some online research and input an estimate. For instance, visit websites for two or three potential lodging options in your destination and estimate costs using their online booking tool (but be aware that these prices can change). Write those estimates into your spreadsheet or on paper, and include any valuable information, such as notices that lodging is booking up quickly or already sold out.

If you discover that costs are a lot higher than you expected, consider the following:

  • Can you take advantage of a less expensive mode of transportation or type of lodging?
  • Should you change your destination or book in the off season?

There are often less expensive alternatives worth exploring, like subway passes in lieu of a rental car. If you opt to drive to save on airfare, maximize the fun with stops along the way. Also, plan your trip for off-peak times. Beyond avoiding inflated prices, the beach is less crowded and still beautiful in the fall, and the mountains offer fun activities even if you skip the traditional season for winter sports.

It's also wise to brainstorm any potential sources of good deals, including promotions from hotels or flight companies you're considering. Service organizations, travel clubs, and big box store memberships all tend to carry some kind of discount that you can factor in when estimating lodging or plane costs. Keep in mind that the best time to book is early: purchase plane tickets 1-4 months out and hotel stays about 40 days out so that you have the lowest possible estimates. If you live nearby multiple airports, it's worth pricing out the trip from each airport to see if tickets are cheaper at a slightly farther-off option.

Also, it's generally accepted that flights right before and toward the end of the weekend are in higher demand. Arranging travel midweek doesn't guarantee a cheaper flight, but experimenting with different times of week can help you price out a lower-cost itinerary.

3. Evaluate your current spending and make a savings timeline

Once you have an idea of what you're likely to spend on your vacation, it's time to set your savings goals. First, evaluate if you have any cash already saved that you can use for vacation; then, determine how much more you need to save.

Before you get started, decide how you'll keep your vacation savings separate from other savings. A separate account at your bank can help you easily set it apart, particularly if you have access to a high-yield savings account and still have at least a year to save. If you're saving for only a few months, doing so in cash can be an effective motivator, since you'll see the savings accumulate, which creates anticipation for the trip.

Then, work backward from your planned trip. If you know you want to save $3,000 total and have 10 months to do so, you might plan to save $300 a month until the trip, or $75 a week. This can seem like a lot at first. However, the average coffee drinker spends around $40 a week on coffee alone, and it's possible to save anywhere from $6 to $15 or more per meal that you eat at home versus eating out. Small changes and time investments do accumulate, and $3,000 is certainly not the only budget level a family can consider. You can save to "fill" your total budget in various ways:

  • Keep your discretionary spending in check. Are there expenses like entertainment, dining out, ordering in, or shopping that you can limit month to month? One way to monitor this is to take a look at your bank or credit card statement and evaluate the charges there. Highlight any expenses that you'd prefer not to make for the next few months, and come up with a strategy for each one. One hypothetical example is if you subscribe to multiple streaming platforms: Consider which ones you could live without for a few months. Or, if you order takeout once a week, cut that down to twice a month and plan to meal prep instead.
  • Sell clothes or other items. Have you been meaning to declutter or get rid of items in your home? This might be the time to sell clothes on an online marketplace, get rid of equipment on eBay or hold a yard sale.
  • Take on an extra shift or overtime. If you have the opportunity for overtime or to cover a shift here and there for a coworker, see where you can fit the extra work into your schedule.

4. Do final prep before enjoying your vacation

A good first step is to create a daily budget for the trip. For instance, you can use the envelope method. Make seven envelopes for the seven days of the trip, and allocate all discretionary cash (the money not already committed to bookings like flights and lodging reservations) to each one. This way, you can estimate how much you'll have available for each meal, ticket or transportation expense while you are on vacation.

If you prefer to use your debit or credit card for your expenses, it can be helpful to make a note in your phone's notes app with daily budget totals. You can then quickly jot down each receipt total after expenses happen. At the end of the day, make sure you've spent within your goal limits—otherwise, make a quick adjustment for future days.

These two methods allow you to keep an eye on your expenses while only spending a couple minutes on them each day, maximizing your time to enjoy the vacation itself. The "unexpected costs" category in your budget can come in handy if prices have changed since you created your budget or you find yourself in a situation where you'd like to spend more than budgeted.

Financial advisors & Money Canvas can help guide your vacation budget

Families that are figuring out what frequency, cost and duration of vacations they can afford really benefit from speaking with a local Thrivent financial advisor. They'll help you talk through all of your financial goals and paint a picture of how your income, savings and spending can prepare you for the future. You can then decide what a realistic vacation budget might be given your financial landscape.

Once you've figured out how a vacation fits into your long-term priorities, you can get into the nitty-gritty of how to save more using the Money Canvas budgeting program. This program offers guidance to help you get started as well as the freedom to allocate your income according to your own values—illuminating where trade-offs may help you to get closer to your goals.