I admit it! I have a tendency to splurge on having fun with my family during summer vacations then come home to credit card bills and bank statements that tend to be more troublesome than initially expected. Seems like I’m not alone though. A survey by the consumer credit reporting agency Experian found that 68% of people overspend during their summer vacations.
In fact 38% of those surveyed by Experian didn’t do any advance saving to prepare for their summer vacations plans and took on much of the expense as debt. While everyone wants to have enjoyable, memorable vacations, overspending and going into debt to fund an excursion can have a number of long-term negative financial consequences including lowering your credit rating, increasing your interest rates and depleting money from the family budget that could otherwise be used for needed household expenses. With the summer travel season approaching, now seemed a good time to share some tips on how to plan for vacations without wrecking your finances that Alexander Joyce, a retirement planner, radio show host and president of Indianapolis, Indiana-based ReJoyce Financial LLC, provided me:
- Avoid Spending Traps: Eating out, massages at a spa, hitting the links for an afternoon of golf, and other spur of the moment activities have a tendency to pop up during vacations. Consider trade-offs for unbudgeted add-ons to balance out the additional expense. Maybe that means going to cheaper restaurants for the rest of your trip or skipping out on going to an attraction that charges admission you’d otherwise would have visited. Do some research before departing to a destination to have a good idea in advance of what are good valued family activities in the area. Avoid being trapped into frivolous spending opportunities that target tourists.
- Budget Honestly: A lot of people come back from vacation filled with regret wondering why they spent so much money. Vacation within your means. Your trip may not be as glamorous and luxurious as you dreamed but you will have a lot less stress during and after your vacation. If you don’t overspend your overall experience will probably be much more enjoyable. Planning and sticking with a travel budget is a must do to avoid financial troubles down the road.
- Skip the travel agent: While they may be convenient, travel agents are an added expense providing a service you can often do yourself for FREE with some time and effort. Nobody knows your budget and preferences better than you do. Trust yourself in arranging a vacation filled with activities you can confidently afford and are sure to entertain and excite all your travel companions.
- Keep your credit card at home: You want to enjoy a vacation and know you’re not paying for it over the years to come. The average American family spends around $1,250 on their credit cards during summer vacations. Try to use your credit card to take advantage of miles and perks without spending more than can be paid off by the time your next statement arrives in the mail in order to avoid interest charges. Consider pre-paying expenses like airline tickets and hotel rooms before you depart and leaving your credit card at home to avoid the temptation to tack on other expenses during your trip. Going into debt for a vacation should never be part of your plan!
- Don’t touch retirement funds: As much as we like to say vacationing is a hot priority, so is saving long-term. Don’t lose focus on that goal! Stay away from retirement saving accounts — 401(k)s and IRAs — as a way to pay for expensive vacations. That dream vacation could turn into a nightmare if you blow your retirement nest egg.