3 tips for establishing (and sticking to) a vacation budget

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Editor’s Note: This story originally appeared on Living on the Cheap.

For Kathy Lopez, everything revolves around the spreadsheet. When she started planning a future trip to Europe with her friends, she put all the expected expenses into a Microsoft Excel spreadsheet to figure out how much the month-long adventure would cost.

“We’re going to save a lot of money and planning time down the road,” says Lopez, a retired city manager from Prescott, Arizona.

If your eyes glazed over when you saw the word “spreadsheet”, please keep reading. Travel agencies don’t want you to budget. They would prefer that you mechanically pass your credit card at the counter, at the reception, in the restaurant. You will spend more and you could end up in debt.

They win, you lose.

“The key to vacation budgeting is planning,” says Rosalyn Glenn, financial planner at Prudential Advisors in Columbia, South Carolina. “The vacation budget should be factored into the annual budgeting process, and the amount of the budget should be determined by the resources you have available to allocate to that position.”

A few general rules for a holiday budget…

1. Save for your vacation

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Set an amount in your family budget. “See how much each month you can save for your vacation by your scheduled dates,” says Tanya Peterson, vice president of Freedom Financial Network, a debt solutions company. The typical consumer spends $2,400 on travel per year, according to Bank of America.

2. Do not go into debt

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Experts agree, it’s not worth it. “Nothing ruins a vacation like the stress of having to pay it back when you get back,” says Dan Simon, retirement planning consultant at Daniel A. White & Associates in Middletown, Delaware.

3. Track Every Detail

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How exactly is someone like Lopez going to save money? His journey from Arizona to European microstates, including Lichtenstein, Monaco and Vatican City, could be a fiscal black hole. She listed every destination, hotel, and activity on the spreadsheet and shared it with her fellow travelers.

“While doing this, we determined that a Eurail Pass would be a good idea, so we bought them on sale,” she says. “We were able to book flights on cheaper days. We got good prices on hotels. And we made the best use of our reward points.

Lopez describes the process – especially the negotiations with her friends – as “excruciating” but worth it. They had to agree on destinations, hotels, rates and how much they wanted to spend.

Whatever you do, leave nothing to chance. Angela Rice, an accountant and travel consultant from Paradise Valley, Arizona, says that’s when things go off the rails.

“We require customers to be open to discussing their travel budget,” she says. “How much can you spend on travel? This will play a big role in determining where you go, how long you stay, when you go, and what you can do while there.

The rice is right. As tedious – and, yes, boring – as creating a vacation budget can be, it’s essential. When people go on vacation, they tend to leave common sense at home.

I watched my parents, kids, and close friends pay for something they couldn’t afford while on the road. I think travel companies know our defenses are down and take advantage of it.

The solution is deceptively simple: create a budget, save for your vacation, plan carefully, then stick to the plan. But whatever you do, think about how much you’re going to spend before you go. Otherwise, you might end up spending money you don’t have.

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