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:
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:
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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