What’s your dream vacation?
Maybe it’s sitting on the beach sipping mai tais and watching the sun go down. Or maybe you’re a bit more adventurous and would prefer renting a van and driving around Iceland’s Ring Road.
No matter what your vacation preferences, one thing is likely the same: Your trip will cost you a pretty penny. Luckily, that’s what savings accounts are for. But how much should you save up for a vacation? And what’s the best way to save?
To answer these questions, we’ll show you how to create your own DIY savings plan so that no matter where your wanderlust takes you, you’ll have enough money in your bank account to get you there and back.
Step 1: Create a Target Savings Goal
Guessing and pulling a random number out of thin air is an easy way you can come up with a target savings goal. But it’s also one that’s likely to leave you disappointed, since you might run out of cash before your vacation ends. There’s nothing worse than being stuck in a gorgeous exotic location but having no money to do anything.
Instead, try this approach:
Tally Up Your Vacation Costs
This will require a bit of research on your part (but honestly, isn’t scoping out all of the opportunities part of the fun?)
In particular, take some time to tally up the total cost of the following things for the duration of your vacation:
- Round-trip airfare
- Trips, tours, and admission prices
Step 2: Create a Working Savings Plan
Now that you’ve got a target in mind, great. Now, what do you do? Create a savings plan, of course.
Here’s how to do it:
Tally up the number of months between now and when you’ll be leaving for your vacation. Then, divide your target savings goal by that number of months.
This leaves you with the exact amount of money you need to save each month between now and when you leave.
Curious to see how this works? Let’s look at an example.
Example: Next Year’s Trip to New Zealand
Let’s say you want to go on a two-week tour of New Zealand next year. You do some research and come up with the following numbers:
- Airfare: $1,100
- Hotel: $150 (per day)
- Food: $50 (per day)
- Souvenirs: $200
- Trips, tours, and admissions: $100 (per day)
The total cost of this trip is $5,500. If you want to go on this trip in 12 months, you’ll need to save up $458.33 per month to have enough cash for the trip.
Step 3: Re-evaluate Your Plan
So far, we’ve just created a working plan. Chances are, you’re probably shocked by how much you need to save — that’s normal, don’t worry!
There are a few things you can do to revise the plan so it fits your finances:
- Adjust your monthly budget: Look for expenses you can easily cut out, such as dining out, subscription boxes, etc. This will free up more money each month so that you can divert it to your vacation fund instead.
- Start side hustling: Side hustling is the easiest way to boost your income. Each extra dollar that comes in is a dollar closer to your travel goals.
- Change your travel plans: Look over your travel plans. Is there any way you can lower your expenses by perhaps staying at cheaper hotels or eating out less? This will reduce the cost of your vacation as a whole. Alternatively, you could push your vacation further out into the future, so that you have to save less each month.
Example: Final Plan for Next Year’s Trip to New Zealand
Maybe you decide there’s no way in heck you can afford to save $458.33 per month. No worries — you can still go!
After looking at the three options listed above, you can make the following changes:
- Cut your $25/month box subscription and cut $150/month from your dining out budget. This frees up $175 per month to go towards your New Zealand trip.
- Start a side hustle and earn an extra $200 per month.
- Opt for staying in backpackers’ hostels instead, for $50 per night. This frees up $1,400 from your target savings goal.
With these changes, you now only need to save $4,100, or $341.67 per month. You’ve also freed up $175 per month from your budget, and are earning an extra $200 per month for a net amount of $375 extra per month. Now, you’re able to save up enough for your trip!
Step 4: Put Your Savings on Autopilot
Now that you know how much your vacation will cost and how much to save each month, it’s time to put that plan into action.
Sure, you can try to remember to set aside money each month into your savings account. But, we promise you that something will get in the way and you’ll likely forget (just like that time you put your car keys in the fridge and couldn’t find them later).
Instead, put your savings on autopilot. You can use Chime Bank’s automatic savings feature to do this for you. In this case, you can set up your bank account to withdraw the money after each paycheck.
All you have to do is count up the number of paychecks between now and when you leave on your trip, divide your target savings goal by that number, and voila! You can set up your account to withdraw that amount from each paycheck so that it’s entirely on autopilot.
Are you ready to travel?
If you follow this four-step guide, all you’ll have to worry about is remembering your camera and deciding which fun activities you’ll do once you’re on your vacation.
This page is for informational purposes only. Chime does not provide financial, legal, or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for financial, legal or accounting advice. You should consult your own financial, legal and accounting advisors before engaging in any transaction.