Question: How much should I spend on a vacation?

Usually when someone asks me this question they want some type of mathematical answer like “about 6.349% of your annual income” or something silly like that. Instead, I like to ask them a few questions like “how much did you spend last year on your vacations?” and “how much did you plan to spend last year on vacations” and "“how does your spending on vacations compare to your spending on home maintence or entertainment?”. Usually the answer to all of these questions is “I’m not sure”.

The point is that it really is difficult to decide how much you can or should spend on a vacation outside of the context of deciding how much you want to spend on every spending category. You should spend whatever you want on vacation as long as you have also decided what you want to spend on every spending category. This is called personal budgeting. It’s not a 4 letter word, or a torture chamber where “they” tell you you have to stop spending so much. It’s “you” deciding and telling yourself what you want to spend ahead of time, then having a system to track your spending so that you are honest with yourself and do what you say you want to do.

I have found that the best way to do this is through the “savings bucket” method of budgeting. Every spending category is a savings bucket, so if you don’t spend this month you can have that money available for future months. If you overspend this month, you can take money from the bucket to pay for it.

Vacation spending is a perfect example. Within your overall spending plan for the year, let’s say you decide you want and can afford to take a week-long $3,000 summer vacation and also 2 long weekends that you estimate will cost about $600 each. So your total budget for vacations is $4,200 per year, which equates to $350 per month. So starting in January, you “spend” $350 each month on vacations by putting that amount into your savings account, then when summer rolls around you can take that money out and spend it on your vacation guilt-free and without having credit card bills you can’t pay.

“Savings bucket” budgeting works the same with every spending category. If you’d like help getting this type of budgeting set up for you and your family, let us know…we can help! Contact us for a free consultation to see how “savings bucket” budgeting can work for you.

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