Do you have big travel dreams but a small budget? With some patience and hard work, here’s how to save for travel without having to resort to a staycation.
After a long year of social distancing and travel bans, you’ve spent a long time being grounded at home. Feeling the itch to travel is only natural; you probably spent your lockdown organizing an elaborate trip abroad.
Unfortunately, the plans in your head may not match up with the numbers in your budget. The past year or so has been hard on wallets, especially if you faced job insecurities during COVID.
But does that mean you have to kiss your dreams of globetrotting goodbye just as these restrictions begin to lift? Maybe not, if you’re willing to overhaul your budget.
Check out these tips to organize your finances. They’ll help you pay down debt and save more money to put toward an exciting trip abroad.
Here’s How to Save for Travel
1. Figure out Your Take Home Pay
If your budget was a home, your income would be its foundation. You need to figure out how strong your base income is before you can start building out your budget to save for travel.
You’ll want to confirm how much you make in a month over all income streams, remembering to look for take-home pay. This is the amount you have after taxes and other deductions come out of your pay.
Your income makes up the boundaries of your monthly spending. Although you may be able to spend more than what you earn by using a credit card or personal line of credit, that’s never a good idea.
2.List Your Essentials
Now that you know how much you have to play with in a month, it’s time to see how your spending compares. Start by listing all your essential expenses, or the things you absolutely have to pay to stay safe, housed, and financially secure.
If you aren’t sure where to begin, here’s a list of some common essentials to get you going:
- Housing costs
- Insurance Premiums
- Transportation cost
- Basic toiletries
- Household cleaning goods
- Minimum payments on car loans, installment loans, credit cards, and lines of credit
Financial rule of thumb suggests these essentials should take up roughly 50–70% of your take-home pay. This leaves you with 50–30% of your remaining income to set aside for fun splurges and, more importantly, to save for travel!
Prioritizing these bills also means you won’t risk late fees and higher interest rates. You’ll even prevent black marks from darkening your credit report, which can help you find more affordable installment loans or lines of credit.
3. Set up an Emergency Fund
Your emergency fund is an account separate from your vacation savings. It’s there to serve as a backup in case your budget goes off the rails.
People make mistakes and you might splurge on a pair of sneakers that you can’t technically afford, or you may forget to budget for a wedding gift for your friends.
These kinds of purchases can drain your expendable cash for the month, leaving you vulnerable to the unexpected. An emergency fund is a buffer between you and the unexpected.
You can tap into these savings to cover the doctor’s fees after seeing your GP about a persistent earache without missing a beat, so you don’t have to put your vacation savings on hold.
Generally speaking, you should aim for three to six months of living expenses in this fund. This cushion could help field several unexpected medical expenses or emergency repairs in a row.
If something happens before you can save up enough, talk to an online direct lender about getting help. Online direct lenders offer convenient cash advances like installment loans or lines of credit designed to help you with unexpected emergencies.
They usually come with fast online applications that work for urgent medical expenses and timely repairs. If you still have questions (like what are online direct lenders, anyway?), you can take some time to research this borrowing option.
Being informed before you borrow an installment loan online sets you up for success.
4. Cut Frivolous Spending
Hitting targets for bills, emergency savings, and saving for travel is much easier when you reduce your fun spending.
It can be hard to say goodbye to the fun stuff so think of it as delayed gratification. It’s all about saving for travel now so you can take a holiday tomorrow.
How much you need to cut depends on a lot of factors. How much of your income do you have leftover after you cover the essentials? What are your biggest splurges right now?
How much will your dream vacation cost? Most people spend their disposable cash on clothes, dining out, and entertainment, so keep an eye on things like shopping trips or nights out.
You’ll also want to cut how much you spend on streaming services, takeout, and these other expenses.
5. How Much Should I Save for Travel Fund
Consistency is key to building savings over time, and automation cuts all the guesswork out of it. You’ll never forget to move cash to your save for travel fund.
Set it so that your bank sends this money automatically at the beginning of the month, so you’re less likely to spend the cash you promised for your vacation on other stuff.
It’ll be like one of the essential bills that you prioritize paying over discretionary spending.
Make Tweaks to Fit Your Finances
This provides a basic framework on how to budget, but don’t be afraid to make any changes. Adjusting this plan to fit your finances better makes it easier to save for travel.
Budgeting doesn’t always come easy, so keep your eye on the vacation prize. Soon enough, all your hard work will help you take your dream holiday.