What I can afford to spend?
The old rule of thumb says your annual vacation should cost about a week’s salary, but the price depends on your fixed expenses (housing, transportation, etc.) and lifestyle choices. The most common budgeting mistake is underestimating expenses. As you research a trip’s cost, remember to include not just airfare and hotels but also meals, cabs, souvenirs, tips, and a cushion for those great—or awful—OMG moments. Financial expert Grant Cardone suggests setting aside an extra 25 percent. Decide when you want to go, and set up a savings schedule. If you are a retiree on a fixed income, pencil in special vacations on a calendar as part of a long term plan that flags the years in which you’ll need extra travel money, suggests Mackey McNeill, CPA and author of The Intersection of Joy and Money.
Should I put my trip on a credit card if I’m short on cash?
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No! Charging travel expenses that you can’t immediately pay back isn’t the way to go. “You end up paying much more than the cost of the trip,” warns McNeill. “When you factor in double-digit interest rates and the months—or years—it may take you to pay off the loan, you can end up spending 50 to 100 percent more.” That also goes for other kinds of borrowing. Don’t use an excuse like “We deserve it” to take out a home-equity loan. Cardone offers a simple guide: “If you’re too ashamed to ask Mom and Dad for travel money, don’t ask a bank or a credit card company.”