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Going on vacation is a great way to relax and spend quality time with your family. But, not making a proper plan and budgeting can put you under financial stress. Here's how you can prepare your budget for your upcoming trip.
Over 33 months of staying indoors due to the Covid-19 pandemic has sent everyone into a frenzy to get out of home and soothe our souls with some traveling. But have you planned a travel budget?
While most of us have saved quite a lot of money by staying indoors and eating only home-cooked meals, many have also faced salary cuts and acute financial crises.
Although people are desperate to return to traveling, the rising recession and excessive price hikes have made that dream out of reach for many. Thus, the pandemic has altered the traditional understanding of traveling and vacation budgeting.
This article will explore strategies for building up a healthier travel budget in this post-pandemic era.
Apply 50-30-20 Rule
Remember the 50-30-20 rule of basic budgeting? Umm…not sure? Let's refresh our memories, shall we?
The 50-30-20 rule is budgeting 101. According to this rule, you should spend 50% of your post-tax salary on your necessities, which includes house rent (if any), home loan EMI (if any), groceries and vegetables, utilities, etc. These expenses are mostly fixed.
30% you can spend on your wants. It can include eating out occasionally, going to movies, shopping, and traveling.
You should save and invest the rest of the 20% towards meeting your financial goals.
How Much should you allocate for Traveling?
There is a massive difference between vacationing with your family and traveling solo. When traveling with your family, you plan to stay at decent properties; you need a bigger vehicle so that everyone is comfortable; and you have to spare some money for shopping and fancier food. Therefore, it would cost you quite a lot.
Hence, you should earmark roughly 5-10% of your salary as your vacation budget. Let's understand this with a small example.
Assume your post-tax annual earning is 10 Lakhs.
50% of it should be allocated for your needs, i.e., 5 Lakh.
3 Lakh can be spent on wants.
The rest of 2 Lakh should be saved and invested.
Hence, following the 5-10% rule, your annual travel budget should be 50,000-1,00,000.
In this budget, you can easily do 10-12 days of domestic trips or 5-6 days of international trips, considering you are mindful of your expenses.
How to Properly Manage your Travel Budget?
Once you have a rough idea about how much you would spend on a trip, it's time to segregate the money to get the best value.
A well-researched, realistic travel budget will help you make the best spending choices.
Plan well ahead of time and document your estimation in a spreadsheet. Yes, we said spreadsheet. Below are the six things your travel plan must include:
Plan how will you Get there
One of the significant expenses of your vacation plan is your mode of transportation to and from the destination. Based on where you are traveling, your transportation cost will change.
If you are traveling domestically, you can reach your destination by flight, train, bus, or even car. But if you are going abroad, a flight would be your only option unless you are going on a cruise.
Our tip: Never book your ticket without comparing the prices. Set price alerts to find the cheapest tickets. You will always find a great deal if you look around.
Where will you Stay?
Accommodation cost is the second largest expense you have to incur for any trip.
If you are traveling with your family, based on your budget, you can explore options like hotel, bed & breakfast, resort, or Airbnb. If you are a solo traveler, backpacker hostels are a great way to keep your expenses in check.
Our tip: Look for accommodation options that offer at least one complimentary meal. If your budget is tight, you can choose to cook at least one meal.
How will you Move around?
Plan how you will move around when you go on your vacation. Every traveler is different.
Based on the number of passengers and your preferred mode of transportation, compare every option your destination offers.
Our tip: If you want to get the local feel and save a few bucks, travel using public transport. You can also opt for self-driven rental cars if your budget allows you.
Plan your Food
Every place offers a wide range of food options. But while you are planning your trip, we are not asking you to list everything you will eat for every meal.
At least mentally set how much you would like to spend per day on food. You can decide this number by researching apps like Zomato, Dineout, Trip Savvy, Lonely Planet Travel Guide, etc.
But if you don't have time to research, then estimate at least 2 to 2.5 times your accommodation cost per night for a day's worth of food.
Our tip: If you are on a longer trip, bring some ready-to-eat or ready-to-cook food items with you and cook at least one or two meals.
Else, you can meet up with locals for home-cooked foods through food-sharing apps. You'd be surprised at how much you can save.
Think of what you will buy
When traveling to a new place, most people buy knick-knacks to bring back as souvenirs or to give to close friends and family. Hence, you should also set aside some amount for that.
Our tip: Make a list of people you'd want to buy gifts for. This will not only save you time while shopping, but it will also prevent you from overspending and impulse buying.
Prepare for Emergencies
Emergencies can happen anytime, anywhere, when you least expect them. It can be sudden medical expenses; you may lose something, get a penalty, or want to go to an impromptu event.
Although it can't be foreseen, you must keep some budget aside in case of emergencies.
Our tip: Set aside one or two days' worth of living expenses as a backup budget.
Making budgets and planning your trip as detailed as possible are the best ways to ensure a financially stress-free vacation.
While the world has changed after the pandemic, travel planning basics will never change.
Be it inflation or recession, plan your trip carefully and save accordingly to ensure your vacation doesn't keep you awake at night thinking about a messed-up budget after you get back.