How To Finance Your Next Vacation
Are you dreaming of a vacation but don’t think you can afford one? Think again.
While vacations can be costly, there are simple strategies that can help you budget, save for, and execute an economical vacation. With a little discipline, and these 5 tips, you will be better able to finance the vacation you’ve always wanted and desperately need.
- Establish a budget
When it comes to determining a price-point for your trip, there is no one formula that applies to all. A December 2016 survey by Community Marketing and Insights found that in 2013, 55 percent of LGBT travelers consider themselves moderate or budget conscious travelers that enjoy the occasional splurge. However, you might not fit within this category, and that’s fine. Whether you consider yourself a luxury or economy traveler, it is important you identify a price-point and establish a plan to acquire the necessary funds to meet it. A trip can be financed by your savings, credit, or a combination of both.
- Consider all the costs
One of the most important aspects of planning a trip is assessing the costs accurately. An analysis from ValuePenguin based on how much Americans reported paying in the Bureau of Labor Statistics' 2013 Consumer Expenditure Survey
estimates that the average vacationer spent just over $580 for domestic travel and over $3,250 for international trips, including food, lodging and transportation. The tendency is to always consider the hotel and the plane ticket first; however, one shouldn’t forget the smaller expenses such as food, tips, taxis, etc.
It is also important to set aside a portion of your budget to cover unforeseen expenses and emergencies. This will give you flexibility to improvise on fun activities and stay relaxed knowing that you have extra money in case you need it.
- Use effective saving strategies
Once you’ve established a budget – that includes all your foreseen expenses plus an extra for those spontaneous decisions – it is time to start saving.
Create a separate budget where you can track your monthly expenses and income, and based off of it, establish priorities. There are tools at your disposal, such as Budget Watch, that can help you throughout this process. Examine which routine expenses you can do without and use that money to fund your trip. An easy way to do this is by opening a savings account where you continuously deposit a predetermined amount of income that will eventually go towards your vacation.
- Be mindful of the risks
According to Wells Fargo’s 2015 “How America Buys and Borrows” survey, for more than one-third of Americans, the cost of a vacation will be one of their largest expenses throughout the year. Even though paying for a vacation with credit can be attractive, it can also be risky if you’re not able to pay the cost of the trip in a timely manner. To take advantage of a tool like credit, it is important to identify the right way to use it.
For example, if you plan to finance your trip with a credit card, you should use a card that earns rewards with every purchase. That way you might be able to increase your budget and even offset some of the expenses completely. However, it is important to emphasize that you should always be ready to pay the debt on the card as soon as possible, otherwise the accumulated interests might result in your trip being much more expensive that what you intended. .
- Prevent identity theft
Vacationers, particularly overseas, have been prime targets for identity thieves looking for credit card and bank account information. In addition, identity theft at home can ruin plans for a peaceful vacation. There are three easy things you can do that will help you avoid identity theft:
· Protect your bank statements and account information: Stolen mail that contains personal information is one of the most common forms of identity theft. Lower this risk by ceasing to receive printed information and use Online Banking instead. While on vacation, leave your check book and important account documents at home in a safe place.
· Monitor your finances. Examine your account statements regularly to stay alert in case there are charges you don’t recognize. Many banks let you set up customized alerts to have a message sent to your email address or mobile device when certain criteria are met.
· Protect your password. Avoid using easily identifiable information, like the name of a relative or your birthday. Use a combination of capital letters, numbers, and other special characters when possible.
- Additional considerations while travelling
a. Notify your bank before travelling. In order to protect you against unauthorized transactions, banks are able to constantly monitor your account activity. Notifying them while traveling will help avoid issues due to suspicious account activity.
b. Exchange money for local currency. It’s always useful to have local currency on hand for taxis, tips, and meals. Upon your return home, you can easily exchange leftover paper currency.
c. Avoid using shady ATMs. If you need to get cash while traveling, only use ATMs at reputable banks, and avoid going alone or at night.
d. Enjoy comprehensive protection from fraud. You should use a card that is protected against unauthorized transactions, which financial institutions should offer at no extra cost.
We hope these tips allow you to discover one of the many ways in which Wells Fargo Advisors is working hard to help you have better financial experiences and outcomes every day.