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Setting the Stage for Vacation Planning – Personal Reflections on New York City from a Recent Trip
To me, New York City is truly a source of amazement and wonder for several reasons.
First, from an infrastructure perspective (yes – the nerdy engineer in me always appreciates the structural aspect of things), it’s fascinating to see a place where SO MANY enormous buildings are built on such a small area of land, yet all of the transportation (subways, roads, and trains) and utility (water, sewer, gas, and electricity) needs of millions of people can still be served by this land at the same time. Second, New York City is fascinating from a social dynamics perspective because it is a place where millions of people from severely diverse backgrounds live and work together in a very small land mass. Yes – New York City is quite a gem and is a very cool place to visit for a vacation!
However, from a personal finance perspective, in my opinion, New York City is a financial disaster as a place to call home. Now, I’m not trying to say that the city or companies located in New York City run their finances poorly. Far from it actually, as I commend the companies that operate there because it is a good, accessible location in which to do business. What I mean is that for the average middle-class American Joe/Jill, because of how expensive it is to live there, New York City just might be the worst thing ever for a person’s personal finance, retirement, debt-payoff, and savings goals.
In fact, in doing a brief investigation on Google, I found a Forbes study reporting that the savings’ rate of not only New York City, but of all 10 of the highest populated metro areas in the US, did not rank in the top 50 highest-saving cities in the country. Clearly, there seems to be a trend that if you want to save money, these big cities might not be the best place to reach your goal (unless of course, you have a high paying job in one of these cities that cannot be located elsewhere).
Budgeting for a Vacation
So, needless to say, in July of this year, when I began planning an early-November trip to New York City to watch my girlfriend compete in the New York City marathon, I knew it would be quite essential to budget for the trip conservatively, save accordingly, and then stick to executing the plan once we were on the trip in order to prevent the scenario of having to pay for things on my credit card that I don’t actually have the money for.
Now, if you’ve read my blog before, you probably know that I am not the biggest fan of budgets in the traditional sense of planning your monthly spending and then saving whatever is left over at the end of the month. What I’ve found is that if people do this, they tend to not have any money left over at all. Instead, I endorse the strategy of saving pre-determined amounts at the beginning of each month.
However, since in the case of vacations, you are only planning your SPENDING needs, budgeting is an appropriate and intelligent exercise.
Listed below are the various categories I like to budget/plan for when preparing for a vacation. It’s worthwhile to note, that for the most part, these are the same general categories that one considers in planning his or her regular monthly expenditures as well (with the exception of Investing and Charitable donations savings). To get you started, I’ve also listed some of the specific cost items that normally fall in to these categories.
Vacation Spending Categories to Consider in Putting Together a Vacation Budget
- Entertainment (shows, museums, games, club entry fees, tours, activities/excursions)
- Lodging (hotels, motels, B&B’s, resorts, or anywhere where you spend the night)
- Transportation (gas, plane ticket, car rental, tolls, parking fees)
- Food (breakfast, lunch, and dinner). I like to use $10, $15, and $20 per person for each of these meals, respectively, to plan conservatively and then multiply by the number of days of the trip (see note below for expensive destinations).
- Miscellaneous (a “cushion” amount to allow for random spending)
- “Wow! Parking costs $45 per night and the hotel is $350 per night in Manhattan! Geez! Better make sure to put this in the plan.”
- When calculating the semi-unknown entertainment and food expense items, be sure to factor in any significant increases or decreases in price based on where you’re traveling. For example, I added in the safety factor of 5 days of meals vs. the actual 4 days of the trip to account for New York City prices.
Saving for a Vacation
- Reaction #1 – “No problem. I’ve got that amount in my savings account already, or someone I know can give me the money.”
- If you are someone who falls in to this boat, congrats! You are lucky! Enjoy your trip and have a beer for me!
- Reaction # 2 – “That’s a lot of money! However, I might be able to save up that much if I plan ahead sufficiently.”
- Reaction # 3 – “That’s too much money! I’ll never be able to save that or go on this trip without putting it on the credit card and making my debt balance increase.”
- For a vacation that is coming up soon (less than 6 months) –
- Subtract your current liquid savings that can be used for a vacation from the budgeted amount you calculated in the previous section to obtain your vacation savings gap.
- Divide this savings gap by the number of pay periods you have until your vacation.
- Then, set up an automatic transfer from your checking to high-yield savings account each pay period for the required amount.
- If you are a chronic vacation lover (someone who likes/plans to take good vacations regularly – 6 months to 1 year away) –
- You will want to place saving for vacations as a regular item in your monthly planning. This would be similar to planned, recurring donations to charities that a lot of people do.
- If you fall in to this category, the best way to proceed is to decide on a portion of your pay that you are comfortable contributing to this savings goal (10% of each paycheck maximum, I would think), and then set up an automatic transfer for that amount each pay period to a high yield checking account.
- For a vacation that is a long time away (more than a year) –
- You can afford to save a lesser amount each pay period.
- This is the case for a trip to the Grand Canyon that I’m wanting to take sometime in the next 2 years or so as part of my life dreams and Purpose Focused Financial Plan.
- For this, saving (with the automatic transfer mentioned previously) approximately 3% of your after-tax, take-home pay should be sufficient.
Executing and Sticking to Your Budget During the Trip
- Keep the receipts from all of your purchases –
- Since you’re out of your daily routine and may not have access to your online bank/credit card statements, keeping a hard-copy of the receipt from all of your purchases helps you to track your spending better while on vacation.
- Before heading out each day, have a “Reality Check & Budgeting Moment” –
- Each day, prior to venturing out on your vacationing activities, 1) add up the totals on all of your receipts from the prior days’ spending using your cell phone’s calculator, 2) record that sum somewhere readily accessible, and 3) archive the receipts you just tallied somewhere in your wallet or purse.
- The next day, you will repeat this process and add the new receipt amounts to the previous day’s total.
- In my experience, by keeping track of the total you’ve spent each day, it will serve as strong mental reminder of how cheap or lavish you can be in your spending on the remaining days.
- Keep your budgeted meal costs in mind when approaching a potential restaurant –
- This is a simple technique, but also is very powerful and easy to forget if you are with a group of people representing a diverse range of budgeting levels.
- However, it’s important to keep in mind the cost per meal for lunch, dinner, and breakfast that you budgeted for when planning for your trip and to avoid restaurants that force you to go above these allotted amounts.
- For example, I budgeted $20 per dinner per person for my NYC trip. If a restaurant was proposed for dinner that only had entrees for $30 or more on the menu, this would have thrown up a red flag for me to politely request to avoid.
- Lodging/Parking – Planned for $210, spent $248.
- Gas/Transportation – Planned for $100, spent $134.
- Food – Planned for $444, spent $328.
- Entertainment/Miscellaneous – Planned for $200, spent $44.
How about you all? What favorite techniques do you use to either budget, save, or make sure you stick to your planned spending during a vacation?
What are the biggest hurdles you encounter during a vacation that cause you to go outside your budget (the people you go with, finding out about new activities, etc?)?
Share your experiences by commenting below!