Planning a summer getaway? Join the club --
the vacation club
You take vacations
to relax and leave behind your day-to-day troubles and cares. That's
why you put up with plane delays, your children's whining when you
speed past a tourist trap and the occasional bout of Montezuma's
The last thing
you want to do while on vacation -- besides undergoing an emergency
appendectomy by Tuareg tribesmen -- is fret about how you're going
to pay when the bills come due.
before you go
The first two steps toward making a vacation affordable are to save
for it -- months before you go -- and determine how much to spend.
Socking away the money before you leave means less financial pain
after you return. As a bonus, planning and saving for a vacation
can get you in the habit of living on a realistic budget.
Many people save for vacations
by placing money in a savings or money market account. If you belong
to a credit union, you might be able to take advantage of a vacation
club account. Like a holiday club, it's an account set aside for
a specific purpose -- in this case, a trip.
"I have four kids and
we like taking a vacation every year, and I don't like running up
my Visa bill just for that," says Joe Thomas, president of
County Federal Credit Union in Virginia and the holder of a
vacation club account there.
So, through payroll deductions,
Thomas saves $25 a week to help pay for vacations.
The money he saves "takes
a pretty good dent" out of the bills. "If we visit family
in California, it defrays most of the cost for the airline tickets,"
he says. "If we drive up to visit family in Maine, it pays
for most of the gas and incidental expenses."
stash of cash
The prospect of not having to endure high credit card bills at vacation
time is the main reason for saving money in a vacation club account.
But it's also a good way to squirrel away money to surprise a spouse
with a fancier-than-expected getaway.
"We have a couple (of
accounts) where I don't think the spouse knows about it," says
Fred Hinds, one of the board of directors of the Haverhill
Fire Department Credit Union in Haverhill, Mass.
So why would someone open
a vacation account instead of just setting aside the money elsewhere?
"People have all sorts
of good intentions with saving money, and they see their balance
inching up and they see something they want, like a big-screen TV,
and they're more apt to withdraw it to buy it," Thomas says.
But money set aside in a vacation club account seems less touchable.
Figuring how much to save
each paycheck in a vacation club account is just like determining
how much to sock away for a down payment or other large purchase:
Estimate how much the vacation
Subtract how much of the vacation expense you want to charge on
your credit cards.
The difference is how much cash you'll need for your trip. Divide
that amount by the number of paychecks you'll receive before you
go on vacation. That is how much you need to save per paycheck.
Lots of summer travelers
How do you know if your vacation budget is reasonable? How much
should you spend? You can get a general idea by comparing yourself
with your fellow travelers. According to the Travel
Industry Association of America, U.S. residents took 233 million
trips last summer and spent, on average, $1,066 on their main vacation.
Lots of people take one long summer vacation and a few weekend trips.
As a rule of thumb, your
credit card debt, dining out and vacation spending together should
not total more than 15 percent of your gross income, says Arne Nielsen,
community outreach coordinator for the Consumer Credit Counseling
Service in West Palm Beach, Fla.
"The problem is that
most Americans are spending most of that on credit card debt. They
end up charging (dining) out, so it comes back as credit card debt,"
If you earn $600 a week and
spend $60 a week on lunches and a dinner or two, that leaves you
$30 a week for credit card debt and vacations. If you want to spend
more on your vacation, it's time to make choices -- in other words,
set up a budget.
Nielsen says that to establish
- Figure how much you spend
on what now
- Distinguish wants from
needs and establish priorities
- Set goals
"We encourage people
to take a month and write down everything they spend," Nielsen
says. "For example, if someone is spending $3 a day on soda
and gum, that's about $1,050 a year."
Knowledge is power: Maybe
you would prefer to cut your soda-and-gum spending in half and save
the remainder for a vacation. Knowing how every dime is spent helps
you put into perspective what you really need, and what you want
but don't truly need.
the debt cycle
If you celebrate Christmas, saving for your vacation helps you break
a vicious cycle of debt. As Nielsen describes it, "We find
that both for vacation and Christmas holidays, most consumers go
into debt and it takes six months on the average for them to catch
Many families put a lot of
their vacation spending on credit cards; and while they're paying
off those charges, school starts; and while they're paying off the
charges for kids' clothes and school supplies, the Christmas season
rolls around. Saving year-round for vacations and for gifts can
break that boom-and-bust cycle.
You can set a realistic savings
goal for a vacation only after you know where you're going and what
you're going to do. You can save a lot of money during the planning
process by starting early and shopping around.
hunt -- for bargains
For example, a quick search on Expedia
shows that a two-week, round-trip flight from New York to Rome in
July, flying coach, could cost from $950 to $1,250 -- on flights
that leave New York hours apart. You can save money by comparison-shopping
hotels, motels and rental cars. Take advantage of discount programs
such as those offered to AAA members and senior citizens.
Or go in the off-season.
A place like Miami Beach might be sweltering in the summer, but
the ocean continues to beckon. The north rim of the Grand Canyon
might be snowy in winter, but the views are just as breathtaking
-- and you can learn to snowshoe.
If you shop early and go
at a slow time of year, you save even more. The aforementioned round-trip
between New York and Rome, if booked five months in advance for
travel in rainy November, would cost between $540 and $590.
And booking far in advance
means that you probably pay for much of your vacation before you
even pack. That makes it easier to withstand the plane delays and
the children's whining, if not the bout of Montezuma's revenge.
"I think that the only
way people are going to have a stress-free vacation is not going
into debt over it," Nielsen says.
-- Updated: Jan. 08, 2003