For many, Memorial Day weekend often signifies as the unofficial kick-off of summer – and with that, also the start of summer vacations. You’ve worked hard all year and now it’s time to reward yourself for a job well done! But unless you employ the right budgeting techniques, you may wind up spending more than you hoped on that highly anticipated getaway.
Getting a head start
After you’ve chosen your getaway destination and figured out all the associated costs, create a budget so that you know how much you have to save toward the trip. In essence, a budget will help you allocate the right amount you need for that getaway of a lifetime. First deduct your current “needs” such as rent, insurance and other bills from your monthly income; any leftover amount can now be saved toward your vacation. Be sure to stick to your budget plan.
Using smart budgeting techniques
Many Americans have a sizable portion of their assets in a 401k plan. It’s automated and comes out of your paycheck without having to think about it. However, many people do not apply the same logic to their taxable world. Consider having an auto draft setup from your checking account to a separate savings account for your getaway. To help ensure you’re sticking to your budget plan, this new account’s funds should not be easily accessible therefore it should not have a debit card, checks, or ATM capability associated with the account.
All-inclusive vacations are another great option to consider. Like most things, there are different price points for packages with different features. However, in my experience, all-inclusive packages help keep the vacation budget in line because most of your non-airfare costs are front loaded. Paying for as much as you can before you go can help simplify your spending.
Spending during vacation
Credit cards matter when traveling internationally. They can be helpful with currency conversion, airport lounges, frequent flier miles, fraud protection and special offers. As you plan, contact your credit card company before booking your trip to learn about their services. It’s also important to let your credit card company know your vacation plans so they are not alarmed by sudden expenses. Finally, have some extra cash in hand just in case there are instances where credit cards are not accepted.
Most people underestimate their expenses in their everyday lives – it’s no different when planning for a vacation. Be specific when creating your budget and make sure you account for all expenses including some cushion for unexpected expenses and fees. By strategically planning and preparing your finances ahead of time, you can preserve the well-deserved, stress-free time away once you’re at your destination.
Anthony Paul is a Financial Advisor with the Global Wealth Management Division of Morgan Stanley in Denver. The information contained in this interview is not a solicitation to purchase or sell investments. Any information presented is general in nature and not intended to provide individually tailored investment advice. The views expressed herein are those of the author and may not necessarily reflect the views of Morgan Stanley Wealth Management, or its affiliates. Morgan Stanley Smith Barney, LLC, member SIPC.