Enjoy Your Summer Vacation — Without Maxing Out Your Credit Cards

By Eric Jorgensen

Learn more about Eric on NerdWallet’s Ask an Advisor

School is out, and summer is upon us. It’s time to let loose and have some fun. That sounds great in theory, but it can be horrible for our finances if we aren’t careful — especially when it comes to taking summer vacations.

For many people, travel is a significant part of their summer budget, but reckless spending while on vacation can wreak havoc on their finances. People often spend more when on vacation, perhaps because they get caught up in the moment or simply because things are more expensive than at home.

So what can you do this summer to make sure you don’t end up with a financial hangover, wondering where the money went or how the credit card bills got so high? Here are a few tips to help you enjoy your summer vacation without derailing your finances.

Make a plan 

It helps to start with a plan for your summer vacations. You don’t have to rule out spontaneity entirely, but having an overview of when and where you’d like to go, what you’d like to do and how much it will cost gets you started off on the right foot.

You can also do some research to identify deals ahead of time. Many hotels offer discounts during offseasons, and some airlines have lower fares when you fly during off-peak times. Services like Airbnb offer competitive prices for lodging and may help you reduce expenses if you eat some meals in instead of going out.

Set up a ‘fun fund’

With a plan in place, you can start saving for your trip. Creating a separate “fun fund” helps cement why you’re saving the money and can help you keep your eye on the big prize when lesser temptations, like a new TV, arise.

To determine how much you need to save each month, divide the cost of the trip by the number of months you’ll be saving. Major trips, such as to a Disney location or overseas, may require significant planning and a longer time horizon to save. For instance, taking a $6,000 trip every three years would require you to save around $170 a month. If you wanted to do this more frequently, you’d have to save even more.

If “staycations” or weekend getaways are more your speed, you may not need to save as aggressively or as long. You can build these trips into your spending plan by setting aside an extra 5% or 10% from your check each pay period.

You can also get the whole family involved by encouraging your children to set aside a portion of the money they receive from birthdays and allowances for parent-free spending while on vacation.

Know your limits

Set a daily spending budget for your trip and don’t exceed it. Include what you’ll spend on food, activities, lodging and anything else that might come up. You can also get your children involved in the planning, having them participate in the family’s budgeting. Even young children will benefit as they are exposed to responsible spending.      

But remember, setting these spending limits means being realistic. If you have to budget $500 a day for a five-day trip because you plan to eat at restaurants for every meal and you want to bring souvenirs home to friends and family, so be it. It’s more important to be realistic about what you’ll spend and to save for it than it is to convince yourself you won’t spend much and go two or three times above what you budgeted.

Stay disciplined

Once you’ve settled on how much you’ll spend, stick to it. It’s easy to talk yourself into not counting little purchases like a coffee here or mouse ears there, but those little purchases add up and can have a significant impact on your vacation fund. Give yourself a 3% to 5% buffer in your budget for the “Oh, that’s so cute” and “Man, I just need to have that” moments — we’ve all had them.

With practice, you’ll get better at estimating how much you’ll need each day, but having a cushion can help in case you underestimate.

Have fun

Most of us aren’t going to plan a vacation down to the minute, but with money saved up in a “fun fund” and a cap on your daily spending, you can enjoy yourself and avoid maxing out your credit cards.

Eric Jorgensen is a fee-only financial planner with MainStreet Financial Planning in Silver Spring, Maryland.