How to save for vacation

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Andrew Goldman

Andrew Goldman has been writing for over 20 years and investing for the past 10 years. He currently writes about personal finance and investing for Wealthsimple. Andrew's past work has been published in The New York Times Magazine, Bloomberg Businessweek, New York Magazine and Wired. Television appearances include NBC's Today show as well as Fox News. Andrew holds a Bachelor of Arts (English) from the University of Texas. He and his wife Robin live in Westport, Connecticut with their two boys and a Bedlington terrier. In his spare time, he hosts “The Originals" podcast.

Saving for a vacation is really not a heck of a lot different than saving for any big purchase—be it a new car, a wedding, or a home of your own. You want to be focused now so that you can find time to reduce stress while on holiday. It takes discipline to accomplish the first and most important principle of saving for anything: managing to spend a little less than you earn.

A little straight talk before we get to the brass tacks of saving for that vacation of yours. There are two super important questions you should ask yourself before you endeavor to save for a vacation:

Questions to ask yourself before saving for a car

A little straight talk before we get to the brass tacks of saving for that car of yours. There are two super important questions you should ask yourself before you endeavor to save for a car:

Are you carrying significant credit card debt?

If the answer is yes, you should devote your savings to eliminating it before you begin to save for anything. Doubt that debt can ruin your life? Read this chilling account of a real couple who spent themselves into a 24/7 waking debt nightmare.

Do you have an emergency fund?

What happens if you fall ill or lose your job? Do you have three to six months of expenses tucked away somewhere safe to cover the period you won't be earning money? If the answer is no, considering devoting all your savings to creating one before moving on to a car. Many credit nightmares begin with an unforeseen event that will force a person to start living on plastic. It's a deathtrap.

How to save up for a vacation

Do you have what it takes to save for a vacation? Of course you do! A little financial discipline will take you far.

1. Take a step back

Saving for a vacation requires you to pause, step back, and study your monthly purchases all at one time. Take a good hard look at both your checking account and credit card statements. And go even deeper by inspecting your grocery store receipts. Look at that handwritten bill of sale from the general store (19th-century readers only). The point is: get a big-and small picture sense of how you spend your money so you can start immediately implementing some money-saving habits.

2. Select expenses you can cut back on

A close look at your statements will likely identify lots of stuff you don't need, automatically renewing subscriptions you don't really use anymore, visits to establishments that might not have seemed expensive at the time, but really add up. Inevitably, you’ll start seeing patterns in your spending and those patterns will reveal lots of ways to save money, starting right now. Congratulations, you’re a financial analyst! Take a good look at your bank account and get rid of anything that doesn't bring you pure joy! Looking for some inspiration? You've come to the right place.

  • Cut the cable cord.

  • Pretend all Starbucks floors are made of hot lava and brew your coffee at home.

  • Learn to love generic brand over expensive designer brands. Are you kidding me with the Gucci shirt!

  • Renegotiate credit card interest rates, cell phone contracts. You'd be surprised how much companies will be willing to bend to keep your business.

Need more ideas? Then take a gander at this fairly comprehensive guide to creating, and sticking to a budget as well as our big money saving guide

3. Open a dedicated wedding savings account.

Once you’ve become a savings Jedi, you’ll want to make sure that you segregate your vacation savings in a separate account so that you don’t accidentally blow all your wedding money on a spur of the moment $1,000 tasting menu

Be smart when planning your vacation

You know what’s a heck of lot easier than saving for a super deluxe, off the hook expensive vacation? Saving for a super deluxe, off-the-hook reasonable vacation. There’s a whole corner of the internet devoted to Scrooging out on vacation expenses, but these Easy Tips for Frugal Travel include some of the better advice we’ve seen, including:

  • Find destinations with favorable exchange rates.

  • Sign up for cheap flight newsletters and set price alerts.

  • Surf the web in “incognito” mode so that brainy travel sites don’t know you’re in the market to buy (and overcharge you.)

How much will you need to put away to finance your vacation?

Here’s a revolutionary concept: why not pay for the entire vacation in cash? Imagine how much better you’d feel sipping a pina colada knowing that when you get home, you won’t have to spend the next years working to service the debt on six ounces of pineapple juice and two ounces of rum.

It’s easy to plot for a cash vacation. Just compute the total estimated cost of the trip, count how many months are left until departure or flight purchase and divide the cost by the number of months. Then, enjoy the most relaxing, debt-free vacation you could have devised for yourself.

Whether you're saving for a vacation, a home, or just need some help investing for your future, Wealthsimple can help. Every Wealthsimple client gets state of the art technology, low fees and the kind of personalized, friendly service you might have not thought imaginable from a low-priced investment service.

Last Updated May 8, 2019

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