Dream vacation could be within reach
You don’t have to search far and wide — just go online
You don’t have to search far and wide to find a dream vacation … on the Internet. Just type the words “dream vacation” into your search bar and up pop millions of options: best trips of a lifetime, bucket list dream vacations, 1000+ ideas about dream vacations and so on.
The more difficult chore? Funding your dream vacation and making sure you don’t overspend while you’re on your trip. How might you achieve that?
PROPER PLANNING REQUIRED Saving for a dream vacation requires pre-planning, says Kimmie Greene, a consumer-finance expert with Mint. You especially want to make sure “a dream vacation isn’t opening up a major budget gap or causing unnecessary credit-card debt.”
According to Greene, there are generally two ways to approach savings goals for travel:
“Identify where you would like to go and for how long to figure a high-level budget of how much it is going to cost,” she says. “Then do the math on what you can reasonably save each month.”
“Identify how much you’d like to spend or can afford to save each month, and for how long, as a way to help zero in on how ‘dreamy’ your vacation may be,” Greene says. “Then steer clear of destinations, hotel choices, firstclass travel, etc. that may push you beyond that budget.”
DEDICATED SAVINGS IS KEY Greene also recommends using a dedicated savings or short-term investment account for your dream vacation. “It’s a good way to put savings in a place where the funds are not co-mingled with your day-to-day finances,” she says. “Keeping them a bit further out of reach will help insulate savings from any urges to tap into them as a slush fund for overspending or other items on your immediate wish list.”
THINK SHORT TERM The best investment for your dream vacation is a function of how long you plan to save for it. In general, avoid saving for your dream vacation by investing in assets that can decline in value, like the stock market.
“When you are investing for only a couple of years, the amount you save matters a lot more than investment growth,” says Nicholas Holeman, a certified financial planner at Betterment. “This is because compound growth, the most powerful part of investing, just doesn’t have enough time to really take effect. You should still invest, but focus your attention on saving.”
BOOK AHEAD Booking ahead is one way to avoid overspending while on your dream vacation. “It requires a little more planning, but buying your flights and hotels ahead of time can save you a surprising amount of money,” says Holeman. “And booking things like tours or other outings ahead of time means these things are already budgeted and paid for by the time you arrive. That allows you to focus less on money and more on relaxation.”
PAY DOWN DEBT FIRST Not to be a buzzkill, but if you have credit-card debt and are planning a dream vacation, you might want to consider this: “The interest gained from saving for your vacation is often outpaced by the interest on any outstanding credit card balances,” says Greene. “So, we regularly encourage people to tackle their creditcard debt first and then look at their plans for a dream vacation. Adding to existing debt is one of the fastest ways to make a dream vacation a lot less dreamy.”