You may be wishing you could start planning your next vacation, but you are worried about how you will afford another trip so soon.
Every financial advisor I know will tell you one of the first things you should do is create a budget sheet.
Step one: calculate your income. This is easy if you are on a salary. If you have a variable income, like me, you may need to add estimates or calculate averages.
Step two: layer in your fixed and variable expenses. I like to budget biweekly instead of monthly, but the process is the same:
At the beginning of the month, or biweekly pay period.
Add up your fixed expenses like your mortgage, phone bill, car payment, and minimum debt repayments.
Then, subtract all of your fixed expenses from your income. That will be how much you can spend on variable expenses.
Make your best guess at variable expenses like groceries, gas, pet costs, etc.
Then, add up what you spent at the end of the month or pay period.
Step three: zero balance your budget. Any money left over should be put into debt or put into savings (for your next vacay!). This is called the zero-based budgeting method.
If you have a budget that is already working for you, that’s great! Use your budget to identify a savings goal and allocate monthly (or bi-weekly) amounts to add to your vacation savings bucket.
Don’t forget to put money into savings and prioritize debt repayment.
Here is a sample of some things to consider in your budget:
MORE TIPS: Adding more to your Vacation Savings account
#1 If a payment ends, keep making it — to yourself! For instance, if you pay off a car or a credit card, keep making that payment, but instead write the check to yourself and deposit it into your vacation savings account.
Once you have the money budgeted, how do you ensure that the money is not used to fix the garbage disposal, pay for new hockey equipment, or buy all of the popcorn/candy/cookies/gift wrap/wreaths your child is selling?
#2 Keep your savings saved easily by creating a dedicated account and setting up automatic transfers.
If you love your bank, give them a call and open a high-yield savings account. You want this money to work for you after all.
Next, set up an automatic monthly transfer for the amount you budgeted.
Looking for something easy to set up? Try Ally, Capital One 360 (formerly ING), Emigrant Direct, or Dollar Savings Direct.
#3 Make a rule that “found” money goes into the vacation fund.
For instance, if you get a rebate, tax refund, gift check, or work bonus, deposit it in the vacation account.
Hope these tips help you in your planning!
If you would like to set up a call to chat about a vaca, CLICK HERE