in: Leisure, Living

• Last updated: March 8, 2024

How Much Should You Spend on Vacation?

Two people relaxing on sun loungers by the beach under clear skies during their vacation.

Recently we’ve been planning a spring break trip and looking ahead to possibly traveling a bit in the summer.

As we’ve thought about possible destinations, trip lengths, activities, and accommodations, the question of budget keeps naturally arising. 

What’s a responsible amount to spend on travel and vacation, and what isn’t?

Is there a rule of thumb to employ in setting a budget for your trips?

Some financial experts recommend this one: spend 5-10% of your net income on vacations.

If you’re in debt, your budget should be closer to the 5% mark; if you’re not, it can be closer to the 10% end of the range. 

So, for example, if your net income is $80k a year, then you could reasonably spend $4-8k a year on vacations. 

There are, of course, many nuances in one’s financial and life circumstances that will affect this number, but it offers a pretty useful guideline.

In addition to employing this rule of thumb, you should think through other factors as you plan the budget for your vacations:

Plan out your whole year. The 5-10% of income number is for the whole calendar year. So when thinking about your vacation budget, you want to not only be thinking about your most immediate trip, but what other trips you want to take over the course of the year, so you know how much money you can allocate to each. If you’re going to be spending a huge chunk of change on a Disney trip with your kids in the spring, then you may need to settle for just going camping in the summer.

Consider the season of life you’re in. If you’ve got little kids still in diapers, you may want to spend less of your income on vacations and do lower-key, closer-to-home trips; no matter how cool of a place you go, trips with small children just aren’t that fun. Save some money now for taking higher-quality trips when the kids are older.

If your kids are in high school, and you want to make the most of the time you have left with them before they leave home, you could justify spending more on vacations.  

Never go into debt to purchase a vacation. Financial experts agree that you shouldn’t put a vacation on your credit card. More and more people are doing that as inflation cuts into their income, and the nation’s credit card balance recently reached a record high. But the APR on credit cards has also reached an all-time high, and putting your trip on a credit card can cost you way more in the long run once that interest starts accruing. 

If you can’t pay for a vacation in cash right now, start putting a monthly amount in a special savings account dedicated to that purpose; once you’ve got the funds in hand, then book the trip. 

Beware of luxury creep . . . Remember that it’s much easier to go up in the luxury level of a vacation than it is to come back down. That is, right now, you feel a 2-star hotel is perfectly amenable. However, once you stay at a 4-star property, a 2-star hotel will seem like an unacceptable comedown. Upgrade to an Economy Plus seat on the plane, and Basic Economy, which once felt adequate, now feels more cramped. 

Of course, there’s nothing wrong with the occasional out-of-the-ordinary splurge, and dabbling in premium options won’t necessarily ruin you for budget fare down the line. But when you book your trip, you may want to choose options that will be sustainable, not just in terms of your immediate trip, but in the long run. 

. . . and entitlement creep. It’s easy to come up with reasons to justify spending big on a vacation. Your job is grinding. You’ve been real stressed. You feel like you deserve a trip. You need it.

Everyone does need breaks and downtime. But you can take these with cheap staycations as well as exotic trips. Being able to jet off to the beach is a very recent development in human history. Billions have lived and died without ever leaving their hometown or village. Nice trips are a meaningful luxury, but in the grand scheme of things, they’re still a luxury.

Don’t get caught up with keeping up with the Joneses. Since travel photos make up a disproportionate amount of what people share on social media, they come to make up a disproportionate amount of what you imagine people are doing with their lives. It can feel like everyone is traveling, and you should do the same. The power of mimetic desire is real! 

Remember that what you see online are just small slices of life, from a small slice of all the people you know. Everyone is not going on amazing vacations all the time. And just because an amazing trip fits one person’s budget, doesn’t mean it’ll fit yours in your current season of life. 

But don’t be a vacation Scrooge either! There are truly few better ways of spending your money than on a vacation. If there’s one area where it’s better to err on the side of spending too much rather than spending too little, it’s vacation. You can really look at it not only as a spend, but as an investment. You’re investing in closer relationships with your spouse and children, improved mental health, expanded perspective, and lasting memories. Tons of research shows that spending money on experiences makes people happy.

Life is for living!

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