The following is a guest post by CFP Board Ambassador Marguerita Cheng, CFP®.
“A journey of a thousand miles starts with one step" has many paraphrases and practical applications to help you navigate your hectic, enjoyable modern life. The intent of thestatement seems fairly clear. Simply stated, no matter how daunting, stressful or intimidating the task may appear, it all starts with one step.
You can apply the practical wisdom of ancient Chinese philosopher Lao-tsu to plan a family friendly vacation that is affordable as it is memorable.
Based on consumer surveys, the average family vacation costs between five and ten percent of total household income. For example, if your family earns $60,000 per year, financial experts advise allocating $3,000 to $6,000 of your annual income toward your annual family vacation budget.
Other families with extended family living overseas may prefer less frequent, international travels.
Regardless of your vacation budget, it is important to develop a plan to help you allocate this money wisely. By understanding your options, you can be a savvy consumer and get more vacation bang for your buck.
Three C’s come to mind: Choice, Control and Collaboration. Here are some guidelines that may help you plan your vacation spending:
- Choice - By starting early, you will have more choice and more options. Use the week between Christmas and New Years to begin researching your options.
- Control - Budgets are like diets, they can feel restrictive. But as an informed consumer, they help you stay in control of how you spend your money. You may be deferring consumption today, but you’ll have more consumption in the future. Take every opportunity to save for your vacation. For instance, your family likes to dine out once a week. Consider cooking at home for two of these meals a month and allocate the savings to the family vacation fund. Evaluate your current discretionary spending for recreation and entertainment as well.
- Collaboration - When you include family in the decision-making process, the experience is more collaborative and enjoyable for all. Keep them involved, from where you’ll go to what you’ll do. Establish a goal based upon the destination and track the goal as a family, and review progress and contributions. Use the family vacation budget exercise as a teaching/learning opportunity for your children.
You want memories of your summer vacation to last a lifetime, just not the expenses or payments!
Vacation may be all you ever wanted and you had to get away, but planning ahead will help ensure you don’t feel summertime sadness when it comes to your personal finances.