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Vacation Planning that Won't Break Your Budget

March 2, 2011

By: Jim Oosterman
Melrose Bank

It's that time of year when winter seems to be never-ending and spring still seems too far away. It is also about this time that people want to escape the dreary weather and decide to plan a relaxing vacation. With any vacation comes the question: how will I afford this? The economy has been poor and as a result, money has been tight for many, leaving little disposable income available for fun activities. Even so, it is not impossible to take a nice vacation; it just requires some financial planning.

Why It's Important to Establish a Budget
To ensure that you will be able to afford that dream vacation, it is absolutely necessary that you begin the vacation planning early, so you will be able to save enough to cover all of the costs. Start by picking a destination, looking at available lodging, deciding your means of travel, and picking dining options; this will help you to roughly determine the cost of the majority of the vacation.

Once you have calculated how much you will need to spend on the necessities, you will need to decide the maximum you are willing to spend on recreational activities and souvenirs. Determining this information will provide you with a vacation budget and still leave you with plenty of time to save up enough money to pay for your trip. Otherwise, it would be a shame to plan a wonderful vacation, only to discover that paying for it would be a struggle.

How to Save Vacation Money
You have your vacation budget planned out—now how do you meet your goal? There are several options of goal oriented savings you could follow that will help you stay on track.

First and simplest is the traditional envelope budget system. With envelope budgeting, you must establish spending categories and then set limits for each category. Write the name of each spending category on an envelope, along with the budgeted amount. Some examples of spending categories are:

  • Groceries
  • Rent/Mortgage
  • Auto Maintenance
  • Utilities
  • Personal Care
  • Entertainment
  • Emergency Savings
  • Retirement Savings
  • Miscellaneous Savings (vacation funds could go here!)

The idea is to cash your paycheck, rather than deposit, and put the allocated amount of money for each budgeted category into the respective envelope. This forces you to only use the money for the labeled category and will keep your spending habits in check. Once you run out of money in an envelope, you will not be able to replenish it until you receive your next paycheck.

A better, and safer, alternative to envelope budgeting is online banking savings tools. These tools allow you to accomplish the same goal as the envelope system, but it is all done electronically, without the need to handle a lot of cash that could be lost or stolen. Using an online savings calculator, you can easily determine how much you need to save each week or month to meet your financial goals. In addition to traditional checking and savings accounts, you may also set up special savings accounts that will be specific for your other spending categories, including vacation funds.

To simplify the process even further, setting up direct deposit will send your paychecks straight into your desired account. If you prefer, you may also set up automated scheduled transfers that will send an allocated amount of money in your main account to your special savings accounts, as needed. This will simplify your responsibilities and take away any temptation to spend money that you really want to be saving. The more you make savings automatic, the easier it will be to keep the habit of putting money aside before you have a chance to spend it.

Tips for Motivation
The idea of saving is a lot easier than actually doing it, so how can you stay motivated to stick to your budget? It helps to remember that your budget will allow you to reach your goal of taking that much needed vacation. Paste pictures of your destination spot around your house as daily reminders of what you're working for or talk to those you will be vacationing with to build excitement about the trip. Monitoring your savings account balance growth will show you that your methods are working and can help encourage you to save more.

Perhaps the most important benefit to following a budget and having adequate savings for a vacation is that you won't have to put it on your credit card. It may seem much easier to put the entire trip on your card and worry about it later, but the truth is that you could end up with credit card debt for a long time. You will feel much more satisfied paying off your vacation up front and coming home to no worries about credit card bills.

James Oosterman is the Vice President of Melrose Bank. He can be reached by telephone 781-665-2500, online at or on Facebook at

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