Five steps to a debt-free vacation

One of the five steps to a debt-free vacation: an automatic savings plan.

Aerial shot of the Beachcomber Island resort in Fiji. You can have a debt-free vacation if you follow these five steps.

Spring is in the air and the frozen grip of winter is releasing its hold.

Naturally, we star to dream of a peaceful salty breeze on a warm summer day. The sun setting and your feet is covered in a pile of sand. This, so they say, is the life. So you go on vacation, enjoy the vacation while it lasts and then …

One Month Later:

You open the mail. Your heart skips a beat. A ball begins to form in your throat. You fight back the tears. How are we ever going to pay this credit card bill?

This, my friends, really is not the life.

In order for vacations to be truly enjoyable you need to be sure they are proportionate to your income. Cash vacations always beat credit vacations. The best way to have a cash vacation is by establishing a vacation budget.

How Much Can You Afford To Spend For Vacation?

Step #1: You need to start this process by asking one starting question: can you afford a family vacation?

Step #2: From there you need to determine how much should you spend on vacation.

Here’s the a calculation: Look over your budget and decide (proportionate to your income and expenses) how much you should spend on vacation. For most families the recommended budget percentage is somewhere around the 5-8% mark would be appropriate. This of course will depend on a variety of factors – How much do you like to vacation? Do you have room in your budget for 5-8%? Are you willing to cut other expense in order to vacation?

Let’s imagine for a moment that you decide you can afford $2,500 for a vacation this year.

Step #3: Set up an automatic savings plan

Take your vacation budget total and divide it by 12. In this case (2500/12) you would need to be saving $210 (rounded up for simplicity) per month.

Set up this automatic deduction using something like ING Direct. Here’s some tips on how to budget with ING.

Step #4: Apply Parkinson’s Law to Your Budget

Parkinson’s Law essentially states that things will expand or contract to fit into the allotted boundaries. As an example, if you have 1 hour to do a job you’ll get it done in an hour. If you have 3 hours it will probably take you three hours.

This applies to your budget because you now need to s-t-r-e-t-c-h you budget as much as possible to get the most vacation out of every dollar.

Now you start dreaming of all the places you would like to go – just keep it within the suggest price range.

Step #5 Confirm your Budget is in the Right Range

Once you have a general sense of where you want to go and what you want to do, break down your vacation into smaller categories and be sure that you have properly accounted for all the expenses. You will need transportation, you will eat, you will tip. Sometimes when people plan a vacation they only focus on airfare and hotels, but that is only a small part of the total cost.

Visit a site like to get a general sense of the cost of hotels, airfare, and car rental.

As long as everything still seems set all you need to do is to stick to your savings plan and enjoy your vacation.

How to Budget On Vacation

While most people think a budget and a vacation are antithetical there are so many reasons to budget on vacation. The biggest reasons is so that you won’t spend 11 months stressed because of your one week vacation. When you’re vacationing you still need to make a budget.

The Simplest Way To Budget On Vacation

From your overall budget subtract your known and fixed expenses.

If you are budgeting $2,500 for vacation and you hotels, car, and air represent $1500 of that total you know you have $1000 left for other activities.

During your vacation just pay cash for everything and only track your ATM withdrawals. If you take out $200 from the ATM you get 5 ATM visits on vacation. This way you don’t need to keep any receipts or write down any numbers. You know that your 5th ATM withdrawal is your last $200 for vacation.

If you stick to this plan you will never have to endure the dreaded after vacation credit-card bill shock.

What do you do to help plan a debt-free vacation?

Craig is a fulltime missionary in Papua New Guinea who writes Money Help For Christians and Help Me Travel Cheap, a frugal family travel blog.

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