Flightster

Financing Your Next Vacation

• by Alan Perlman
• on July 26th, 2010
• 6 Comments

Bogged down with how much your next vacation is going to cost?

While there are many resources for the budget traveler, the kind of advice most often needed—like how to save and budget for a trip—is often overlooked. It’s really quite easy to start saving, especially if you know proper strategy.

Interested in a trip to Rio de Janeiro? What about a hike in the Himalayas, or a yacht off the coast of Australia? Sure, these three excursions might cost a couple thousand dollars, but they are more approachable than you might think.

Check out these five tips to finance your next vacation:

Break it Down

Considerable experience suggests that the mind responds more positively to a goal that is within reach. Why get in shape when you can focus on a more specific aspect of fitness, like running a mile in x minutes or completing x push ups without stopping? Metrics can serve as powerful motivators and are an easy and fun way to track progress.

Which brings us to travel. First, you need to figure out how much the trip is going to cost. Focus on the big-hitters, like transportation and lodging, and then determine how much you’ll spend on a daily food allowance and any kind of tours or adventures you plan to take within the destination country.

Chris Guillebeau, a celebrated travel blogger on a quest to visit all 192 countries before the age of 35, writes:

I’ve been to a lot of places in the world, and I’ve found that even the furthest destinations on earth usually cost less than $2,500 to get to and back. Most of the time, it’s a lot less—there are many countries I’ve gone to for less than $100—but for planning purposes, we’ll use the high end.

Even using the most extreme example—a $2,500 destination and three years to save for it—you will only need to save about $2 a day to get the funds for your trip. You’ll even have enough left over for meals and duty-free shopping!

There you have it. Once you determine the cost of your trip and subsequently when you’d like to leave, you’ll see that saving for it is more approachable.

Minimize

A trip can be life changing, and so can the way you prepare for it. Odds are you have a number of items laying around that are just itching to be turned into cold, hard cash, cash that can be used to finance your next vacation. Items like clothes, electronics and books can be sold through various outlets–on Craiglist or eBay, to a friend or family member, or if you’re really brave, through a well-publicized yard sale.

Depending on how many items you have, this could yield a significant sum. Even if you only make $50, that might cover food for 1-2 days, or gifts you plan to bring back for the very friends and family that helped you unclutter your life in the first place. Hmm, there is a thought.

Automate

Use a targeted savings account, specific to your trip, and automate the amount of money that gets put into it each month, even if it’s as little as $10 or $20. Over time it all adds up.

Setting up such an account takes as little as five minutes. I use ING Direct, but there are other options as well. Nearly two years ago I opened up an account with ING Direct, setting up a sub-account called, “Denali Savings Fund.” Each month I put in a little money, and hopefully after a few more years I’ll have enough to climb Denali (Mt. McKinley) up in Alaska.

J.D. Roth at Get Rich Slowly, a top personal finance blog, writes about his experiences using ING Direct’s sub-accounts in an article called, “How to Open Multiple Accounts at ING Direct.” If you’re unfamiliar with this process, it’s worth a read.

Niche Budgeting

We all have expenditures, some more necessary than others. I’m talking to all you beer and coffee drinkers, cigarette smokers and yes, compulsive shoe shoppers out there.

Curb your vices. Replace the money you would have spent on cigarettes or coffee to help fund your next vacation. Personally, I spend too much money on used books. Instead of spending $40 or $50 on Amazon.com, maybe I will heed my own advice and transfer more money into my “Denali Savings Fund.” Yes, maybe I will do that.

So should you!

Take Out a Loan

Wait, seriously? I can take out a loan to travel?

Not exactly. This bit of advice is for all you current students. If you’re taking out a loan for college or graduate school, consider asking for more than you might need. Call it an extra living allowance, if you will, because we all know that taking a vacation is the best kind of living there is. In the long run, you’ll still be paying back those loans over 5, 10, and in my case 30 years, but in the short run an extra $2000 or $3000 may be incredibly valuable to your vacation plans.

I have a good buddy, currently in law school, who took out extra (cough, cough) “living expenses” to help start a business. With education loans offering such competitive interest rates (often below 5%), padding your loan can be a great way to finance your next vacation.

Alan Perlman

Alan Perlman travels the world as an international cost-of-living surveyor. When he's not hunting for the price of female undergarments in places like Syria, Rwanda and Turkmenistan, he's hanging out in Boston, MA, staying active, meeting people and brainstorming business models. You can read more about Alan and his plans to conquer life at his blog, The 9 to 5 Alternative.