There’s a lot to consider when planning the perfect getaway. For most people, the number one consideration in trip planning is cost. But if we stress about expenses during vacation, that defeats the whole purpose of travel as an escape from our daily rituals, a chance to reset, rest, and relax. Fortunately, with a little bit of planning and some good tips and tricks for creating a solid budget, you can take the spending anxiety out of the equation and be well on your way to a stress-free (and affordable) vacation.
How much of your budget should you devote to travel?
When saving for a trip, or multiple trips, the financial formula may slightly differ person to person. There’s no standard percentage of income that should be set aside for travel. The amount depends on what you want to prioritize and what works for your income.
“There is not necessarily a set amount or percentage that you should use for travel. After all of your bills are paid for the month, you will have a leftover portion for discretionary spending,” said Christopher Miller, a financial adviser with Krueger Financial Group. “You will then have to make a decision on what to use this for—what is most important to you. It may be buying the newest electronics, going out to eat, traveling, or saving up for a big purchase such as a home improvement.”
Miller recommends using the 70/20/10 breakdown. This means 70 percent of your income should go toward household expenses, including debt. Twenty percent should be put into savings, including retirement. That leaves 10 percent of your income for wants, including travel, or for additional savings.
The first step to deciding how much to devote to travel is pinpointing the cost of your ideal trip. Price out hotels, airfare, activities, and food and get a rough estimate for what the entire trip will run. Once you know how much to save, you can figure out how long it will take you to do so.
“We recommend keeping track of all monthly income and expenses, monitoring what is coming in and going out. By doing this, you will have a good idea of how much travel you can afford,” said Miller. “For any large purchase [like travel], saving a little each month to reach your goal is very helpful. If the trip total will be $2,400, saving $200 a month will meet your goal in 12 months.”
Having a guilt-free vacation means knowing you won’t go into debt because of it. Saving before a trip is the best way to ensure that. There is nothing wrong with putting trip expenses on a credit card, provided you have the money to pay it off immediately or without accruing interest.
What are the travel expenses to consider?
After you have a rough idea of the trip’s total cost, you can break it down into itemized travel expenses. Here is where you can get a little creative and start to think about your dream itinerary.
The first and most important factors to consider are airfare and accommodations, as these typically are the two biggest ticket items of your overall travel budget. Will you splurge on accommodations, or do you consider them solely a place to sleep? Do you have credit card points to redeem for hotel upgrades or discounted airline tickets? If you’re new to points and miles, we will briefly touch on that soon.
Once the flight and accommodations are out of the way, you can see what you have left over for food and entertainment, based on what makes the most sense for you.
Everyone’s travel priorities are different. Foodies, for example, are going to want a bigger budget for dining out, while others may prefer to cook to save money for activities, shopping, or spa treatments (in which case, you may opt for a vacation rental or residential-style hotel that has guest rooms outfitted with kitchens).
“My typical travel expenses include accommodation, flights, activities, and food,” said Caroline Lupini, who has been a full-time traveler for the past decade and is the managing editor for Forbes Advisor’s credit cards and rewards travel verticals. In the past 10 years, she has visited more than 100 countries while living on the road full-time.
“I especially love food, so I budget extra money so I can go on food tours, visit nice restaurants, and otherwise explore the food culture of a country more deeply. This year, my partner and I are traveling through West Africa for a large part of the year, so we also had to include a pretty significant budget for visas. Depending on exactly where we end up visiting, we could end up spending around $1,000 each on visas. To date in 2024, I’ve spent $350 on visas alone.”
How to establish a daily budget while traveling
Lupini said, “I have my normal budget for accommodation, flights, food (restaurants and groceries), drinks, activities, and other miscellaneous charges that come up. I log all of my expenses into an app called TravelSpend, which makes it easy to keep track of spending in multiple currencies, and every month I log my totals into a spreadsheet.”
If she comes in under budget, she says she puts half of the leftover money into investments and half into what she has deemed her “special trip fund,” a fund for special activities she wants to do that are beyond what she considers affordable.
“It’s my guilt-free travel-spending money,” she said. “I think this is a strategy anyone can apply to their own finances to save money for travel.”
How to stretch a trip with points and miles
Using credit card points and airline miles is a great way to make your travel budget work harder and to get some cool perks along the way, like free breakfast, and room or airplane seat upgrades. But if you feel overwhelmed by the complexities and nuances of the individual points and miles program, know you are not alone—it’s a lot of information to digest. Even loosely understanding some ins and outs can stretch your trip budget. And because travel often includes higher price-point purchases such as airfares and hotels, it’s an opportunity to earn points and miles for future trips—in other words, using your current trip to help pay for your next adventure.
“I love points and miles. I got into learning about that space when I was in college and wanted to travel more but had very little cash to work with. Now I often use my points and miles to upgrade my travel experience—think business class on long-haul flights and the occasional cushy hotel room instead of booking an Airbnb or a more affordable hotel,” said Lupini.
There are many resources for getting into the points game. She recommends reading forums and blogs and following influencers on Instagram and TikTok to get their tips and tricks.
“My biggest recommendation,” she said, “is to look for someone, or multiple people, who has a similar travel style to what you’re going for and follow them to get started. I also recommend starting with one flexible points currency, like Chase Ultimate Rewards. You’ll have a lot more options with the flexible point currencies than with a specific type of airline mile, and there are easier redemption options available if you decide you don’t want to dig into the individual frequent flier programs too deeply.”
Set aside some funds for emergency or surprise expenses
No one intends for things to go wrong on a vacation, but sometimes the unexpected comes up: a canceled or delayed flight, a lost hotel reservation, a medical emergency, lost luggage, etc. Surprise expenses are a part of life, and they certainly can be a part of a vacation, as much as we hope they aren’t. Having a backup plan or an emergency fund can help lessen the financial blow that these surprises may cause.
“The unexpected always happens, but not going over budget will help account for the emergency expense,” said Miller. “Keeping an emergency savings account that is not factored into your travel expenses will help cover these as well. A person should always have an emergency account whether traveling or not.”
Travel insurance is one of the best ways to protect yourself in the event of emergencies or surprises. Often, travel insurance includes emergency medical insurance as well as an amount for canceled or delayed trips, lost luggage, and more.
The key things to remember when budgeting for travel is not to overspend, to make sure you’re protected, and to have enough money saved so that you can relax and have fun. A vacation is a time to treat yourself—within your means.
Miller added, “Not overextending yourself with the amount you spend on travel is important. Paying for a vacation for the next 12 months [after the trip] can hurt you in the long run.”
