Saving For Fun & Vacation: You Can Do It!

This article was originally published in the Spring 2018 Imagine Magazine.

Close your eyes and picture your perfect vacation. With a little planning, you can make your travel dreams a financial reality.

Leisure activities, such as taking a vacation, enjoying dinner at a favorite restaurant or going to the theater to see a funny movie, are good for our bodies, minds and spirits. In fact, a 2015 study published in the Annals of Behavioral Medicine found that when people participate in leisure activities they enjoy, they benefit from a mood boost and lower stress levels and heart rates.

Even though vacations and other leisure activities are good for us, we may avoid booking a trip or pass on a night out because we’re focused on saving for our futures. Fortunately, thoughtful savings habits help ensure there’s room in our budgets for retirement savings, an emergency fund, necessities and fun.

Your Goals, Realized

Setting realistic savings goals for your dream vacation requires an estimation of how much you plan to spend. In general, American travelers spend roughly 3 percent of their pretax income on vacation travel, according to a Fidelity Investments analysis of Consumer Expenditures Survey data from the Bureau of Labor Statistics. Following this benchmark, an annual vacation budget
of $1,680 is average for someone who, for example, brings home $56,000 in pay before taxes.

Once you have a goal in mind, think about when you’d like to take your trip. How long you have to save dictates how much
you’ll need to set aside every month to reach your goal. To make sure no spending category is overlooked, Fidelity Investments
recommends a “50/15/5” spending plan, which allocates:

» 50 percent of your take-home pay for essentials, such as housing, groceries, insurance, your car payment and fuel, and credit card or loan payments

» 15 percent of your pretax pay for retirement

» 5 percent of your take-home pay for emergencies, such as car repairs

This savings plan accounts for roughly 70 percent of your income. How you spend the remaining 30 percent is up to you. If you’re saving for a vacation, stash some—or all—into your vacation fund. The same goes for fun expenditures—this is the money to use for movie and concert tickets or restaurant meals.

Navigating Roadblocks

Setting aside funds for a vacation or night out isn’t always easy, especially if essentials account for more than 50 percent of your income. Prevent barriers from getting in your way with these tips from Fidelity Investments:

1. Make sure you’re getting the best rate. You can’t always adjust your rent, house payment or car payment, but you may be able to save on the insurance that protects these investments. Compare multiple companies’ rates for car and homeowners or rental insurance to see if you can uncover savings.

2. Adjust your thermostat. Raising or lowering (depending on the season) the temperature on your thermometer by 7 to 10 degrees for eight hours every day can cut your annual utility expenditure by 10 percent, according to the U.S. Department of Energy.

3. Cook at home more often and plan meals according to which ingredients are on sale. Eating out on special occasions won’t make a huge dent in your budget, but doing so every day can cost you. For example, buying lunch every day costs nearly $2,000 per year on average.

4. Be mindful about subscription services. Magazines, streaming services, gym memberships and other subscription costs can quickly add up. Part ways with any programs you don’t use enough to justify the cost.

5. Make savings automatic. Establish a designated vacation or fun fund and earmark a certain portion of each check to go automatically into this account. This ensures your money is there when you need it.