How much should you spend on vacations per year, and what price points can you truly afford?
A vacation gives travelers the opportunity to see new places, make memories, and experience different things while taking a break from their everyday lives, but trips can also be an opportunity for many people to blow their budget and overspend. That’s especially true now with high average vacation costs, including the cost of airfare, entertainment, and dining out all being hit by inflation.
But you can still get away without jeopardizing your financial security. You just need to spend some upfront time figuring out how much vacation you can afford, putting in place sound strategies to save for the expenses, and then planning a trip that fits within your budget. Check out these tips on how much to spend on vacation while sticking to budgets.
Determine Your Budget
The amount of vacation that you can afford will depend on your personal financial situation. One rule of thumb to try would be to use a 50/30/20 budget, where 50% of take-home income goes to non discretionary expenses like rent and utility bills, 30% goes to discretionary spending, including vacations, and 20% goes to savings accounts. Using this framework, you can decide what portion of that 30% of discretionary spending you want to set aside for travel.
The average cost of a domestic vacation in 2023 was estimated at $283 per person per day, a total of $1,584 per person for a weeklong trip, by BudgetYourTrip.com, a travel expense website. That includes an average of $206 per night in a hotel room, $37 per day for transportation, and $46 a day for food.
But those estimates do not include airfare, which rose a substantial 25.6% between January 2022 and January 2023, according to the Bureau of Labor Statistics. The actual fares you will pay will naturally vary by destination and distance from your home, but even a relatively short trip could cost several hundred dollars per person more than basic hotel and food expenses.
Because of the higher transportation costs, it may make sense for families to opt for vacations within driving distance, which could free up other parts of your budget to spend more on food or entertainment. You could also save money by traveling in the "shoulder season," meaning visiting a destination right before or after its busiest time, when prices at hotels and restaurants may be more reasonable. In addition to food, transportation, lodging, and activities, you’ll want to create a small cushion in your travel budget to account for unexpected expenses that could crop up unexpectedly.
Use Goals-Based Savings
One way to quickly make progress toward a savings goal is to have preset contributions go into your savings account without having to think about it. Goals-based savings means tracking your progress toward certain life goals, such as saving for a child’s education or, in this case, a dream vacation.
You can use the goals-based savings tool available with your Fifth Third Momentum® Savings Account to set a goal and save toward that goal through both automatic savings or a set amount per period. You can also use "smart savings," which automatically moves money from your checking account to your savings account and can be applied to goals later on. You can watch your progress toward your goal on the Fifth Third mobile banking app, and move money in and out of your vacation fund at any time.
Pick a Destination
Once you have a rough estimate of how much you want to spend on your vacation—and you’ve started saving up to pay for it—you can get started on the best part of vacation planning—deciding where you’ll go and what you’ll do when you’re there. Depending on your budget, you can tweak your vacation plans to keep the trip more affordable—or to splurge on certain aspects of the trip.
Once you’ve determined your vacation budget, you can figure out how much you need to save—and for how long—to reach that goal. Start by setting aside any extra cash in an account earmarked for vacation. If you want to save more, consider cutting back on other discretionary expenses for now to free up extra cash for your vacation fund, or consider whether there are other ways to bring in additional income, such as starting a side hustle or selling older clothing or electronics you’re not using.
Shop Around for Travel Deals
One benefit of planning ahead for a vacation is that you have time to shop around and compare prices for the trip. If you’re flying, you might consider setting up online price alerts for your flight, so that you can get a sense of the cost of the airfare and snag a good deal if you see one. You can also sign up for rewards programs with hotels and attractions at your destination to see if they advertise any deals that can help you cut back on other costs.
By planning ahead and saving for your vacation, you’ll be able to take some of the financial stress out of the trip, since you’ll know that you’re not going to have to figure out how to pay for it later.