There are a lot of things to consider when planning the perfect getaway. For most people, the first consideration when planning a trip is cost. But if we focus on spending while on vacation, it defeats the whole purpose of travel: to escape our daily rituals and have a chance to recharge, rest, and relax. Luckily, with a little planning and some solid budgeting tips and tricks, you can take the cost anxiety out of the equation and be on your way to a stress-free (and affordable) vacation.
How much of your budget should you spend on travel?
When saving for a trip or trips, the financial formula can vary slightly from person to person. There is no standard percentage of income to dedicate to travel. The amount depends on what you want to prioritize and what fits your income.
“There's not necessarily a set amount or percentage that you should use for travel. Once you've paid all your bills for the month, you'll have some left over for discretionary spending,” said Christopher Miller, a financial advisor at Krueger Financial Group“You will then need to decide what you want to spend the money on, what is most important to you. This could be buying the latest electronics, going out to eat, travelling or saving for a big purchase like a home improvement.”
Miller recommends using the 70/20/10 split. This means that 70 percent of your income should go toward household expenses, including debt. Twenty percent should go toward savings, including retirement. That leaves 10 percent of your income for your wants, including travel, or for additional savings.
The first step in deciding how much to spend on a trip is to determine the cost of your ideal trip. Evaluate the cost of hotels, airfare, activities, and food and get a rough estimate of the total cost of the trip. Once you know how much to save, you can determine how long it will take you to do it.
“We recommend tracking all of your monthly income and expenses, tracking what’s coming in and going out. Doing this will give you a good idea of how much travel you can afford,” Miller said. “For any big purchase (like a trip), it’s really helpful to save a little bit each month to reach your goal. If the trip totals $2,400, saving $200 a month will get you to your goal in 12 months.”
Going on a guilt-free vacation means knowing you won't have to go into debt. Saving up before you travel is the best way to ensure that. There's nothing wrong with paying for travel expenses with a credit card, as long as you have the money to pay for them immediately or without accruing interest.
Would you rather treat yourself to a hotel or opt for a more affordable boutique establishment like the Coco Hotel in Copenhagen so you can spend more elsewhere?
What travel costs should I consider?
Once you have a rough idea of the total cost of the trip, you can break it down into detailed travel expenses. This is where you can get a little creative and start thinking about your dream itinerary.
The first factors to consider are airfare and accommodations, as these are typically the two largest items in your overall travel budget. Will you be spending a fortune on accommodations or will you just treat it as a place to sleep? Do you have credit card points to redeem for hotel upgrades or discounted airfare? If you’re new to using points and miles, we’ll cover that briefly shortly.
Once you have your flight and accommodation sorted, you can see what you have left for food and entertainment, depending on what works best for you.
Everyone has different travel priorities. Foodies, for example, may want to budget more for dining out, while others may prefer to cook to save money for activities, shopping, or spa treatments (in which case you may want to consider a vacation rental or residential-style hotel with rooms equipped with kitchens).
“My typical travel expenses include lodging, flights, activities and food,” said Caroline Lupini, a full-time traveler for the past decade and the credit card and rewards travel editor for Forbes Advisor. Over the past decade, she’s visited more than 100 countries while living on the road full-time.
“I’m a foodie, so I budget extra to go on food tours, visit great restaurants, and explore a country’s culinary culture more deeply. This year, my partner and I are traveling in West Africa for a large portion of the year, so we’ve had to budget pretty heavily for visas. Depending on where exactly we end up going, we could end up spending around $1,000 each on visas. So far in 2024, I’ve spent $350 on visas alone.”
How to Create a Daily Budget While Traveling
Lupini said: “I have my usual budget for accommodation, flights, food (restaurants and groceries), drinks, activities and other miscellaneous expenses that arise. I record all my expenses in an app called Travel expenseswhich makes it easy to track expenses in multiple currencies, and each month I record my totals in a spreadsheet.”
If she can reach her budget, she said she puts half of the remaining money into investments and the other half into what she called her “special travel fund,” a fund for special activities she wants to do that are beyond what she considers affordable.
“This is my guilt-free travel spending money,” she said. “I think it’s a strategy that everyone can apply to their own finances to save money for travel.”
How to extend a trip with points and miles
Using Credit Card Points and Airline Miles is a great way to stretch your travel budget and score some cool perks along the way, like free breakfast and room or seat upgrades. But if you’re feeling overwhelmed by the complexity and nuances of the various points and miles programs, you’re not alone: There’s a lot to take in. Even a rough understanding of some of the ins and outs can add up to a bigger travel budget. And since travel often involves bigger purchases like airfare and hotels, it’s an opportunity to earn points and miles toward future travel—in other words, use your current trip to help pay for your next adventure.
“I love points and miles. I first got interested in them when I was in college and wanted to travel more, but had very little money to work with. Now, I often use my points and miles to enhance my travel experience.” business class “People prefer to take long-haul flights and occasionally book a comfortable hotel room instead of booking an Airbnb or a more affordable hotel,” Lupini said.
You can use points and miles to upgrade to United's Polaris business class seats.
Courtesy of United Airlines
There are many resources for getting started with the points game. She recommends reading forums and blogs and follow influencers on Instagram and TikTok to get their tips and tricks.
“My main recommendation,” she said, “is to find one or more people who have a similar travel style to what you’re looking for and follow them to get started. I also recommend starting with a flexible points currency, like Chase Ultimate Rewards. You'll have a lot more options with flexible points currencies than with a specific type of airline miles, and there are easier-to-use redemption options if you decide not to delve too deeply into individual frequent flyer loyalty programs.
Set aside funds for emergency or unexpected expenses
No one wants things to go wrong during the holidays, but sometimes the unexpected happens: flight cancelled or delayeda lost hotel reservation, a medical emergency, lost luggageUnexpected expenses are a part of life and can certainly be a part of the holidays, even if we hope they aren't. Having a backup plan or emergency fund can help lessen the financial blow these surprises can cause.
“Unexpected expenses always happen, but staying within your budget will help you cover emergency expenses,” Miller said. “Keeping an emergency savings account that doesn’t count toward your travel expenses will also help cover them. A person should always have an emergency account, whether you’re traveling or not.”
Travel insurance is one of the best ways to protect yourself in case of an emergency or surprise. Travel insurance often includes emergency medical insurance as well as coverage for canceled or delayed trips, lost luggage, and more.
The key things to remember when budgeting for a trip are to not overspend, make sure you are protected and have enough money set aside so you can relax and enjoy yourself. Vacations are a time to treat yourself, within your means.
Miller added: “It's important not to overspend on travel. Paying for a holiday for 12 months after you travel can hurt you in the long run.”
