5 Ways to Save for Your Dream Vacation
08 Feb 2017
A trip to Europe or Hawaii sounds so wonderful, yet the goal appears unattainable. These so-called dream vacations can come true. Most people don’t realize that it takes considerable focus to save up the funds for the trips. Explore these five strategies to save for that next, special trip. You’ll bask in your country of choice in no time.
Research a Number
You can’t save for a vacation when there’s no tangible numbers associated with it. Create a dummy reservation that includes transportation, lodging, meals and entertainment. Try to round all of these numbers upward to account for inflation and trip surprises. Although you may think that traveling conservatively is possible, eating out will normally take up a good chunk of your trip’s resources. Shoot for a high estimate on your dream vacation so that you can save up as much money as possible. Underestimating the costs will only make the goal unattainable.
Hide Away Surprise Income
For many households, the realization that extra money is in the bank only conjures up thoughts of going shopping. Promotions, raises, tax refunds and other unexpected income should be put toward the dream vacation. Create a vacation savings account, if necessary, so that the funds are separated from the everyday income. When you don’t count this income as part of the household, you won’t be tempted to spend it. As it sits in the savings account, it can gain some returns as you continue to save up through the year.
Open a Money-Market Account
An alternative to standard savings is a money-market account. When you invest some of your dream-vacation funds in these accounts, they have low risk. The rule you must live by, however, involves no withdrawals for a certain time period. In fact, the funds might be unavailable for six or 12 months. If you know that the funds won’t be needed within that time period, it makes sense to gain the higher interest money markets. Add money to the accounts too, and you’ll see even higher returns with the larger balance.
If your vacation is more than 5 years away, it may be worth it to skip the money-market account and put the savings in a growth stock mutual fund, which have a high performance rate in time horizons greater than five years.
The future value of money in a savings account may be limited so you can try to generate more funds by being creative. Hold a yard sale, or sell items online. Your garage can be a treasure trove of potential funds if you open it up to interested parties. As an alternative, donate goods to charitable causes. Although you don’t generate cash in your pocket, the donated goods are normally tax deductible when the season arrives. Lower your tax burden, gain a larger refund and you’ll be able to save for that dream vacation.
Make a Shopping List
Shopping can be a tricky situation when you have temptations all around you. Before you enter any store, make a list of essential items. You need to buy shampoo and soap, but there’s no need to buy that tabloid magazine that tempts you at the checkout register. Be aware of what you’re placing in the shopping cart so that your spending remains at a minimum. You may want to try some generic products instead of the name brands as well. Saving one dollar on a product may not seem like a lot, but it can add up over the course of a year.
Don’t forget to take any rewards programs into consideration. You may have hotel or credit-card points that add up very quickly through everyday purchases. Take a look at the rewards terms so that they can be applied to your dream vacation at some point. You might be able to pay for some costs with these points without damaging your overall budget.