Planning a summer getaway? Join the club -- the vacation club
By Holden Lewis • Bankrate.com

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 revenge.

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.

Save 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 the Fairfax 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."

A secret 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?

Discipline.

"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 will cost.

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," Nielsen says.

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 a budget:

• 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.

Breaking 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 up."

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.

The 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