The ultimate guide to budgeting for a marvelous holiday.
Fly now pay later? No thank you….. I can think of nothing worse than a financial hangover filled with debt and worry after a fabulous holiday - especially if you are already dealing with the post holiday slump.
I was shocked to find out from the latest Canstar consumer pulse report that 58% of Kiwis spend more than we earn. Based on this and various money conversations with friends and clients over the years it is safe to assume that a lot of us are using debt to fund our holidays - UGH.
Ready for a hard truth? If you can’t pay for your holiday upfront then you can’t afford it. The solution? Have a more spectacular holiday by saving up for it and paying in cash (by cash I don’t mean the paper kind but actual money that you have earned or saved).
Ready for a real-world example? Here are the steps that I personally apply when budgeting for our fab getaways:
1/ Plan in advance
As part of our money routine we have an annual money date where hubby and I dream up ideal trips and large purchases for the upcoming year and beyond (for anything more pricey such as a new car). Planning a year in advance also gives you time to wait for sales for flights (one of our money rules is that we fly business or premium economy for trips 5 + hours so this saves us a lot of dough).
2/ Pick the one ‘must have’ trip
Once we have decided what trips we want to take, we pick our top one and budget that first. For example, this year our top pick was Fiji. On the side lines as nice to haves was a trip to Aussie, Queenstown and some smaller local trips.
3/ Plan out the $$$
Yes - that means doing a budget for your holiday. Don’t worry - you have my blessing and support to keep it simple. Adios fancy spreadsheet with 4 tabs and 100 links and formulas - no judgement here if that’s your thing ;-). I just add a new ‘note’ on my iphone. Here is what this looks like for our Fiji trip in August:
Flights $2100
Accomodation $8200
Day to day spending (transport, eating out, activities) $500 (our accommodation is an all inclusive package so includes activities and food but not alcohol, hence this is pretty light)
Buffer $1000 (I would have a higher buffer if our trip was longer and our accommodation wasn’t all inclusive)
Insurance $0 (Ours come free with our credit card, but this will need to be purchased separately if not. Note: this is NOT a promotion of using credit cards. We are really disciplined with ours and never, EVER put any purchases on it without having the cash upfront).
Total Budget = $11,900 round to $12,000
Tip: Round up your budget and make sure to add a buffer! I don’t know about you but when I am on holiday the last thing I want to do is think about whether I can afford an extra cocktail or not do an activity because I forgot to budget for it. This lets you YOLO without coming back with debt or needing to dip into your emergency savings or your house deposit fund (yes I see this happening all the time). Worse case scenario you come back from your holiday with extra cash. On our last trip to Queenstown we came back with more than $2,500 left over.
4/ Reality check and prioritize
We do a reality check of whether we can actually afford the holiday based on our current savings rate. For example if we are able to save $2,000 towards a holiday each month and our trip is budgeted at $12,000 then it means we can save the money in 6 months. If it is January now, it means we can afford our trip by July. We then do a quick plan to make sure we can afford to purchase each item for the trip as required. Example:
fights will need to be paid for when booking (so I will have this money ready to go before booking)
accommodation may require part or full payment depending on the deal
day to day spending money won’t be needed until we go on the trip
insurance will need to be paid at time of purchase
Key takeaway? Don’t go into debt, dip into your house deposit or emergency fund for a trip.
Save up, save extra then have a terrific time!
Bon Voyage.
Disclaimer: A friendly reminder that as always all of my posts are not financial advice and is for entertainment and educational purposes only.
Photo credit: https://aspa00.tumblr.com/post/177325865044 