How to spend what you don’t have without going broke

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AJ & KJ: We were having a conversation about vacations with family the other day and the question came up “how do you take a last minute vacation, spend a few thousand dollars and NOT tap into your emergency fund?” I.e. creatively saving money on expenses you hadn’t planned or that are significant. It’s actually this very concept that forced us into more detailed budgeting! While on an extended vacation many years ago we were talking about how we could stop spending money on stuff we really didn’t care about (senseless eating out that made us gain weight, extra clothing that we rarely got around to wearing, going out for stuff that wasn’t important but added up) and start putting more towards the stuff we really did care about (trip of a lifetime vacations, earlier retirement, being able to donate to causes that matter to us).

There are two ways to approach this concept:

1. Proactively –
You KNOW you’re about done with the daily grind and need to get away, so you start chipmunking away extra funds (read save money) each month by cleaning out what’s already in your pantry vs. purchasing unnecessary non-essentials, avoid eating out for the month, carpool when convenient and avoid any over-and-above expenses. Whatever’s left in your budget for the month gets added to the get out of dodge fund!

Here are tips to consider:

  • Save money through saving that change (who uses paper currency these days anyways though?…).
  • Bring your lunch to work one or two extra times per week. Put what you otherwise would have spent ($5, $10, $15 – big spender are you?) into your vacation fund. Imagine how quickly you could be saving money!
  • Turn off your water at home when it’s not absolutely needed (like during brushing your teeth). Sure, a good thing anyways, but best to be more cognizant of keeping those extra dollars in your pocket. Sometimes saving money is done at the margin.

    2. Without any planning whatsoever –
    Flights are suddenly dirt cheap, you’ve got use-it-or-lose-it vacation days burning a hole in your pocket (Americans are in fact the largest group of people that let vacation days go unused) and you’ve about had it with life, so you go! This isn’t your trip of a lifetime, so don’t act like it is.

    Do things like:

  • Drink reasonably priced wine.
  • Stay at a reasonably priced place.
  • Be realistic about what you can and cannot afford.
  • Make use of public transportation – from subways to buses, knowing the process and system can save you hundreds!
  • Share meals – it doesn’t always have to cost an arm and a leg to have a great meal.

    It’s not rocket science, you’re taking this trip on (potentially) borrowed funds, so don’t push your luck! The key to this plan working is to not put this last minute trip on a credit card you can’t pay off entirely during the next billing cycle (i.e. through your regular monthly cash flow or through your previously saved vacation fund). Potentially put less into your savings and track what you spent and should have saved, so you can “recoup” that savings in the coming month(s). Ideally you’re recouping that lost savings across a maximum of two months of tightening your spending belt and focusing on getting back on track.

    Being proactive is generally our preference, but every once in a while you just have to make a choice to live a little. If you keep it from derailing your budget for the entire year it can be completely do-able and absolutely worthwhile.

    Should I dip into my emergency fund for a vacation?
    For some people, that involves keeping a separate account with this vacation purpose in mind. Sometimes, compartmentalizing your expenses and savings is a good thing – it keeps you from dipping into your emergency fund for something that’s really not an emergency, plus you shouldn’t be dipping into any of those other targeted savings accounts like IRAs, 401(K)s, HSAs, etc.

    No matter how urgent that break seems to be don’t dip into your emergency fund for a vacation – spending money saved in this way is not a good plan. You’ll be sorry when you get back home and realize that leaky faucet busted while you were out. Not only is everything in your house ruined, you just spent what you had that you could fall back on.

    Usually, we’re planning for it in advance and have a month or so leeway (not that we have the details outlined, but that we have SOMETHING we want to plan), and then hunker down those couple of months (and afterwards too if needed). This obviously isn’t always realistic for most – particularly when you just need to get away! – but setting up an account for this “get away” fund that doesn’t detract from your other retirement, health, and long-term goals can be quite useful.

    Mileage credit cards
    One other option that we’ve used over the years (several times I might add) is if you’re planning a vacation far away or where the airfare is quite costly, then really consider heavily the benefits of opening an airfare credit card that will pay you 50,000 miles for spending $X in a certain amount of time. Usually you need some lead time to do this since you have to spend a certain amount first, and then wait some period to get the actual miles, but it’s literally saved us thousands on vacations that we had otherwise planned on taking. Saving money this way is sometimes far easier than you would think!

    Hotel credit cards
    Not really my area of expertise since for extended vacations our preference is a rental home or apartment, but there are equally great options for hotel credit cards to be able to get 1, 2, 3, or MORE nights stay for free if you spend a certain amount on the card.

    The key with any credit card though is responsible credit use. Don’t rack up those bills on the card (nice meals, extra items you don’t REALLY need), just to get the credit. That’s a lose-lose proposition for you.

    Whether you’re gearing up for a three-day trip or a two-week getaway, be sure your plan includes some of the above planning, so you don’t come back to reality with a worse headache than when you left. Nothing says “vacation over” like a lingering bill that you have to face when you get back from that “dream” vacation. Not so dreamy after all, is it?

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    6 thoughts on “How to spend what you don’t have without going broke

    1. Last week, I just had the biggest changes in my life. I thought everything is totally a mess but I was wrong, I focus on the positive side. So now I really wanted to have a vacation even a short one, my sister asked me if I can come with her. Honestly, this is totally an unexpected vacation but I’m trying to save for our trip next month.

      • And that’s just part of life (and budgeting) sometimes! From time to time you have to change course and direction and be open to that. It’s important to have flexibility!

      • Thanks Tony! Glad you were able to get some good tips from our post! What was it that jumped out at you?

        • I think it brought out the need to be proactive about planning a break and also ensuring that the portion you put on a credit card should be kept to a realistic figure that you can pay off in the next payment cycle.

          • I agree. It’s a MUST to keep it to only those expenses you can pay in full at the next payment cycle. It’s all about building responsible credit behaviors and being cognizant of those expenses!

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