Smart vacation budgeting: How to make travel a priority

By Gina Coletti

Make vacations a financial priority without compromising your goals by using these practical tips for budgeting and maximizing your travel dollars.

Vacations are more than just a luxury; they’re an investment in your well-being and relationships, offering opportunities to recharge, bond, and create lasting memories. But how do you make travel a financial priority without derailing your other goals? For many, travel is a non-negotiable part of their discretionary spending. Here are some practical tips and strategies for creating a vacation budget and maximizing your travel dollars.

How much should you spend on vacations?

Whether you’re allocating for one lengthy vacation with lots of splurges or for more frequent low-key weekend getaways, a good rule of thumb is to allocate between 5% and 10% of your annual income to vacation and travel expenses. The exact percentage will depend on you and your family’s preferences and priorities. The key is to treat vacations as a standard line item in your annual budget, not an afterthought.

Use advanced planning to your advantage

Successful vacation budgeting starts with planning. Sit down at least once a year—ideally at the start of the year—to solidify your travel plans, decide how many trips you want to take, and set a realistic budget for each. Some families even plan vacations 18 months in advance, which allows for better deals and more flexibility.

Booking early is one of the best ways to save money. Many airlines and hotels offer lower rates and special offers for advance bookings, and some airlines will even refund the difference if prices drop after you book. Keep an eye on prices and be ready to modify your plans if a better deal comes along.

Research your destination

Smart budgeting doesn’t stop at deciding where to go; it also encompasses knowing how to make the most of your money once you’ve arrived. Take time to research your destination. Would you be travelling in peak travel season or during off-peak times? If you travel internationally, what’s the exchange rate? Are vacation home rentals cheaper than hotels? Is it more cost-effective to stay slightly outside the city center and use public transport? What are the top free or low-cost attractions? Which neighborhoods offer better value for food or entertainment? Planning your itinerary with these questions in mind can significantly stretch your travel dollars without sacrificing the experience of your dream vacation.

Don’t forget the hidden costs

When budgeting for a trip, it’s easy to focus on the big-ticket items, like flights and hotels. However, it’s crucial to account for daily vacation expenses, such as meals, activities, transportation, and souvenirs, and even for mishaps, such as lost luggage or weather anomalies that necessitate on-the-fly purchases. A comprehensive budget ensures you won’t be caught off guard by unexpected costs once you arrive at your destination.

Maximize savings with loyalty programs and rewards

If you travel frequently, joining airline or hotel loyalty programs can pay off. Accumulating points can lead to upgrades or free nights or flights, which can be factored into your travel budget. Many airlines also offer mileage programs, where you earn miles for each flight you take. These miles can be redeemed for future travel, upgrades, or even companion tickets. Some programs allow you to combine airline miles with credit card rewards for even greater value. Credit card rewards can also help offset costs, but it’s important to use credit responsibly and remember not to overspend for the sake of earning points.

Be disciplined with your savings

Creating a vacation fund is one thing, but sticking to it is another. Treat your travel savings like any other financial goal by setting up automatic transfers into a dedicated vacation account. Consider using a high-yield savings account to make your money work a little harder while it sits. Staying disciplined means resisting the urge to dip into this fund for non-travel-related expenses. Over time, even modest, consistent contributions can grow into the travel budget you need, without the post-vacation financial hangover.

Should you use a travel agent?

Technology and AI-powered platforms have made it easier than ever to plan travel independently. However, a trusted travel advisor can offer significant value for busy professionals or those managing complex itineraries. By handling every detail—from flights and accommodations to dining and excursions—a skilled agent not only saves time but also reduces stress and elevates the overall experience. Many have access to exclusive perks and preferred rates that are not publicly available. For a recent trip, I included the cost of my travel agent in the vacation budget, and the time saved, seamless execution, and added benefits made it a worthwhile investment.

Is travel insurance worth it?

Travel insurance is an important consideration, especially for expensive or international trips. It can protect you from unexpected events like trip cancellations, medical emergencies, or extended layovers. Insurance may not be necessary for smaller trips, but for major vacations, it can provide peace of mind and financial protection.

Make vacation a budget priority

Too often, vacations are treated as spontaneous splurges, something squeezed in when time and money magically align. But when travel isn’t part of your financial plan, it can lead to overspending, debt, or missed opportunities. That stress can take away from what should be a time of rest and joy.

Instead, treat vacations as a meaningful part of your overall financial wellness. Whether you’re traveling solo or with family, investing in travel is investing in yourself, and Nixon Peabody Trust Company’s financial advisors can offer guidance on how to incorporate vacations into your financial strategy. By planning ahead, budgeting wisely, and leveraging available resources, you can enjoy memorable vacations without compromising your financial health.

Gina Coletti
Chief Fiduciary Officer
Office: +1 617.345.1110
gcoletti@nixonpeabody.com