From a Europe trip with friends to a honeymoon in the Maldives, big holidays may be a treat but they don’t come cheap. There’s a whole list of expenses to think about before jetting off to your destination, like plane tickets, accommodation and travel insurance. And that’s not counting all of the other costs you’ll have to factor in once you’ve landed abroad, from the food to the activities.
So, depending on whether you’re planning on vacationing next week or next year you’re first going to have to whip up a travel budget, so that you can get an idea or how much you’ll need to save (or borrow) for your grand adventure.
Here’s some funding options for you to get the ball rolling…
6 MONTHS OR MORE BEFORE DEPARTURE
Get savings savvy
The more money you save upfront, the better, so it’s time to get really savvy with your day-to-day finances. By giving your current budget a health check, you’ll be able to see which areas you could cut down on costs, both big and small, and channel those everyday savings towards your upcoming vacation instead. Since your budget maps out all of your expenses, it can help you spot key culprits behind the minuses to your income, whether that’s your energy bill or your unused gym membership!
Hot tip: You may have heard of the ‘50/20/30’ budgeting rule where 50% of your monthly income goes into essential spending (e.g. groceries, debt repayments), 30% into fun (e.g. entertainment), and 20% into growing your savings. But if you’re extra keen to save up for that holiday, tweak this rule by adding in ‘holiday fund’ as its own category and dedicate, say, 5-10% to that goal.
Make your money work for you
Rather than letting your savings sit inside a regular bank account earning zero interest, the wiser route is to transfer them into a high-interest savings account, maybe even one that grants you bonus interest for making no withdrawals. And unlike a bank account, a standalone savings account also doesn’t usually come with a debit / ATM card which is good news, as you’ll be less tempted to ‘dip’ into your holiday stash for that new pair of sneakers or a greasy comfort meal on a Friday night!
Hot tip: Did you know some savings accounts and money management apps have inbuilt features such as rounding up tools that are designed to help you save? For instance, say, you buy a coffee at Starbucks for $4.50. If you have an account with a rounding up feature, it will round up the purchase to $5.00. $4.50 of it goes to Starbucks and the remaining 50 cents goes directly to your savings account. It might not sound like much but if you rounded up every purchase over a year by 50 cents, you’d be surprised at how much money you could save!
LESS THAN SIX MONTHS BEFORE DEPARTURE
Consider taking out a vacation loan
While it’s always better to have money saved up in advance, it isn’t always possible and this is when a personal loan could be the perfect vacay funding option. There are interest rates and fees to consider but as personal loans are usually set out over a set period of time, say 2-5 years, you can look at it as a way of reverse saving. So rather than saving $200 a week in advance for your trip, you may end up repaying your bank $200 a week.
Hot tip: Look for a personal loan with flexible features that give you the option to make extra repayments or pay out the loan early without penalty.
Pack travel-friendly plastic
If you’re going overseas, a credit card is something that you’ll want to have, regardless of whether you’ve got money saved up in advance or not. Not only is a credit card safer than carrying wads of cash, these days some cafes and restaurants around the world are 100% cashless and only accept card payments.
But the danger with a credit card is that you can spend up to your credit limit and this could be way more than what you’ve budgeted for, so it can be tempting to overspend. But just remember that at some point, that card balance is going to have to be repaid so have a solid payment plan and choose a card that is low on fees such as foreign transaction fees and interest rates.
Hot tip: Some premium and rewards cards may come with free complimentary overseas travel insurance, so it could be worth searching for credit card with this perk if you want one less travel expense to worry about.
Whether it’s finding ways to grow your savings faster, or using credit to give your holiday fund a boost, the key thing is to go with the strategy that suits your money situation and travel plans best. If you’re savvy about where you’re getting that extra bit of cash, you could bring yourself one step closer to financing your next big holiday!